What Are Mineral Rights?

When you buy land, there are actually two pieces to the property; surface property and mineral property. Frequently, these pieces are severed for the right to extract minerals.

Surface Rights

Surface rights give the land owner specific rights to manipulate and improve their property from the surface up. You may build structures and install underground structures also. If you have water on your land, you have the right to use it as you wish. You can build roads or whatever else you may desire, within zoning codes.

Mineral Rights

Mineral rights are the rights to everything under the surface. These include but are not limited to oil, natural gas, coal, iron, copper, metal ore, stone, gravel, clay and sand. Mineral rights also give the owner the right to explore, develop and extract those resources even if the surface rights are held by a different party. By law, mineral estates take precedence over surface estates. This is due to the fact that mineral rights are useless if they can’t be extracted.

The United States is one of the few countries that individuals and organizations are allowed to own sub-surface materials. Most countries retain complete ownership of these valuable resources.

Selling or Leasing Mineral Rights

Both surface properties and mineral properties can be bought, sold and transferred separately. If you have a fee simple deed for your property, then you own both pieces. Although, it is not uncommon for a parcel of land’s mineral rights to have already been sold by a previous owner.

Extraction companies and investors who think there are worthy minerals under a property will often approach landowners (or whomever owns the mineral rights) to sell or lease their mineral rights. There are different levels of compensation for selling versus leasing.

Leasing Mineral Rights

Pros

Retain Ownership: You retain the long-term mineral rights. When the lease expires the mineral rights return to you
Lease Income plus royalty interest: You get paid for the lease and lessee pays you a royalty on the sales of any minerals extracted.
Lease bonus: Lessee pays you an additional amount when you sign the contract.
Delay Rental: Payment to extend the lease.

Cons:

No drilling, no royalties: If the lessee doesn’t explore or doesn’t find the minerals they were looking for, then no royalties get paid.
Possible Value Loss: Minerals change price over time, and if you lease your rights, you may end up losing out on the better price.

Selling Mineral Rights

Pros

Lower Risk: You will get a set price for your rights minerals per mineral acre. You lose all future claim to the minerals but you are guaranteed a certain amount.
Instant Gratification: Get your money now. You won’t have to wait until the lessee starts excavation and sells the product.

Cons

Less Risk, Less Rewards: Buyers know that they are assuming all the risk of your minerals not being productive, so they pay out at a lower price value.
No Control: Whoever owns the mineral rights also has purchased access to your surface estate to use as needed for excavation. When selling, keep this in mind because your property may occur damages that if they aren’t negotiated for in advance, you will be left with little recourse for repairs.

If you are considering selling or leasing your mineral rights, it is important to get a mineral property specialist. The people buying your mineral rights are highly knowledgeable in mineral rights transactions with a professional negotiator on their side. They have been doing these transactions for years.

Make sure you have Frontier Land on your side, knowing that will be fighting for your rights. We will not only help you negotiate the best price for your mineral rights, but also help you negotiate your contract to protect your personal property while the buyer is excavating. Protecting landowners is what we do.

If you don’t have significant knowledge and lease or sales contract writing and negotiating, you may end up giving away more rights than you intend. With a professional landman on your side, we make sure that you are protected. Lessees will frequently negotiate revisions to a lease or sales contract.