Mineral rights have long been the subject of lawsuits, federal government interventions, and of course, get-rich-quick stories. In the famed television show The Beverly Hillbillies, Jed Clampett and his family find themselves the beneficiaries of untold riches after discovering oil on their property. For most mineral rights owners, though, possession of these rights isn’t nearly so romantic—or lucrative.
Whether you own mineral rights, want to access them, or are curious about the connection between real property ownership and the ownership of minerals, mineral lights law can be a complicated area. State laws vary, so it’s critically important to talk with an attorney in your state before proceeding with a mineral rights transfer.
What Are Mineral Rights?
It might surprise you to learn that, though minerals, gas, and oil are inextricably linked to the land upon which they rest, property ownership is a completely separate matter from mineral rights. It’s possible to own a huge plat of land and to have no right to the minerals that lie beneath it.
Mineral rights confer five key rights on owners:
- The right to use a reasonable portion of the land’s surface to access the minerals. This doesn’t mean you can destroy the land, but if you must dig or do some drilling underground, you’re generally entitled to. You do not, however, have a right to damage the property owner’s personal possessions or property.
- The right to convey the mineral rights to another party.
- The right to bonus consideration (a cash payment by the person renting the property, as an incentive to sign a lease).
- The right to receive delayed rental payments. If you lease your rights to a third party an they delay drilling, you can request payment for the delay.
- The right to receive a portion of the profits, better known as royalties, even if you’re not the one selling the commodity you own.
Mineral rights are entirely separate from property rights in all states, which means you only benefit from these rights if you are the mineral rights owner—not the property owner. Of course, it’s possible to simultaneously own both, but ownership of one does not necessarily indicate ownership of another, and purchasing land does not necessarily mean that ownership of the minerals contained on that land will transfer to you.
Mineral vs. Surface Rights
You might have heard lawyers bandy about terms like surface rights. In mineral rights law, surface rights refer to the right to own the land above the minerals, as well as resources such as water, plants, and other goods on the property. The rights a surface owner has are heavily dependent on his or her contract with either the mineral rights owner, or the company drilling for these resources. Some popular clauses include:
- No surface operations—These clauses outright prohibit certain types of surface operations. This can be limited to a certain portion of the property, or apply to the whole property. These clauses are commonly used to prevent the building of certain types of wells.
- Surface damage payment clauses—When drilling for minerals damages the land, or impedes a land owner’s productivity, mineral rights owners or oil and natural gas companies can be required to compensate the owner. Note that this must be worked out in advance; there is no fundamental right to surface damage payments.
- Location approval—These clauses allow a land owner to approve specific locations for drilling.
- Land reclamation—These clauses require oil and natural gas companies to restore the land to its original condition, insofar as is possible.
- Water clauses—A variety of clauses can protect the owner, or his or her rights to the water on his or her property. For example, you can execute a contract prohibiting drilling that contaminates your water supply. Because drilling typically requires access to water, you may also limit how much water the oil company can access.
Unfortunately, surface owners have very few rights when it comes to the minerals that lurk beneath the surface. To access any of the potential rights outlined in these clauses, you’ll have to contract for them. And if you have no such contract, the mineral rights owner may give significant access to the oil and natural gas company.
Can Oil, Gas, and Mineral Rights be Transferred Separately from the Real Property?
Mineral rights and surface rights are completely separate matters, which means you can transfer one without the other. You can even just transfer a portion of one. Particularly on old land where minerals have long been extracted, it’s common for the mineral rights and surface rights to be divvied up in a complex array of ways.
What you can’t do is transfer mineral rights that you don’t own, or force someone else to give up their mineral rights. Some states, though, do offer additional rights to surface owners. For instance, Utah’s Surface Owner Protection Act of 2012 requires mineral companies to pay a bond to plug wells and repair pollution from wells. The law also mandates that companies must minimize interference with the surface owner’s land, and compensate the land owner for any excessive loss of crops or damage to the value of the property.
The Ownership Transfer Process
Though most mineral rights laws are uniform across the nation, every state has the right to establish its own process for the transferring of mineral rights from one party to another. Mineral rights are property rights, just like a home or a plat of land. For this reason, the process of transferring mineral rights is virtually identical to the process of selling or transferring land.
In most states, you’ll need to fill out a conveyance that transfers the deed from you to the new owner. If you’re only transferring a portion of your rights, or are transferring various portions to multiple people, you’ll have to complete paperwork for each portion, and make it clear who gets which portion of the rights.
A lawyer in your state is the best source of information on the correct ownership transfer process. In Texas, for instance, owners must execute a Mineral Deed in the presence of a notary public. The deed must contain a property description, note that the deed gives the new owner rights of ingress and egress, and be filed in the office of the county clerk where the land is located. Until the deed is filed, ownership does not change.
How Can I Find Out Who Owns the Mineral Rights to a Property?
Because documents pertaining to the ownership and sale of land are public records, it’s generally fairly easy to find out who owns mineral rights you’re interested in purchasing. Simply do a title search at the county clerk’s office in the county in which the property is located. You’ll need to contact the most recent owner, and if there are multiple owners or portions of the property have transferred at different times to different people, you’ll have to contact every owner who holds property you’re interested in buying. Say, for instance, two siblings split mineral rights on a plat of land. You won’t become the sole owner of the rights if you only purchase from one sibling; instead, you’d be entitled to half of the rights.
When Mineral Rights Aren’t Included in a Property Transfer
Many people have made the mistake of purchasing land on the false assumption that doing so will also entitle them to that land’s property rights. As should be clear by now, though, surface property rights—including rights to a home or to the land on which the home is situated—are a fundamentally different matter from mineral rights.
Generally speaking, you have no right to a land’s minerals if you only own the property—even if you mistakenly believed you’d be getting the minerals, too. There are a limited number of exceptions to this rule, such as when a seller engages in fraud or severely deceptive trade practices. Ultimately, though, you have no right to take someone else’s property solely because you misunderstood the terms of the deal. If you have purchased land without mineral rights, your best bet is to ask the mineral rights owner to sell the rights to you.
If an additional contract or judicial order requires the owner to transfer mineral rights to you, your cause of action would be under that contract or order. For instance, if you’re named as a mineral rights beneficiary in the will, and the current owner only transfers the property to you, you can sue to access the mineral rights that are rightfully your own.
Leased vs. Deeded Mineral Rights
Deeded and leased mineral rights can seem similar at first blush, since tenants and owners often use mineral rights for similar purposes. For instance, oil and natural gas companies routinely rent mineral rights from their owners, using the property for a set period of time.
If you opt to rent someone else’s mineral rights, you can use and work the land, so long as you comply with the terms of the lease. You won’t, however, be entitled to:
- A signing bonus for renting the land.
- Sell the property, or lease or sub-lease it to a third party without permission.
- Charge royalties for the use of or access to the mineral rights, unless the terms of your tenancy explicitly state otherwise.
Mineral rights tenants are often required to sign agreements agreeing to restore the land to its original condition, particularly if the property owner has concerns about the long-term state of the land. If the property owner is a different entity from the mineral rights owner, it will generally be up to the owner of the mineral rights to address conflicts between the tenant and owner.
View Real Estate Deed Forms Available in Your Area
Ultimately, prospective purchasers of mineral rights should know that owning the land never confers mineral rights. To own the minerals, you must buy them separately. Once you do, you have access to a wide array of money-making endeavors, including renting the mineral rights out to a third party.
References:
Humphrys, C. R. (1960). Mineral rights: Oil, sand & gravel. East Lansing: Dept. of Resource Development, Michigan State University.
Louie, L. (2014). Mineral land rights: What you need to know. Cork: BookBaby.