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What Are Mineral Rights?

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  • Written By: DM Gutierrez
  • Edited By: Jenn Walker
  • Last Modified Date: 31 October 2016
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    Conjecture Corporation
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Mineral rights are defined as the right to keep, sell, or exploit any minerals under the surface of a particular plot of land. Examples of minerals include gold, silver, coal, oil and natural gas. Although most countries do not allow individuals to own the rights to the minerals under their property, the United States has a range of mineral rights options. Many of these options vary from state to state.

The simplest mineral rights situation is called fee simple. The fee simple, or complete ownership option, gives the landowner the rights to anything on or under the surface of his or her property. The landowner can retain all rights and sell them intact to someone else; he also can sell, transfer, trade, or deed the mineral interest to another party. Selling the mineral rights to a particular piece of land severs those rights from the land surface rights. Whoever purchases the property next will no longer be in a fee simple situation since the minerals will belong to a separate entity.

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In some cases, a landowner can sell a portion of the mineral rights, e.g., the rights to the coal under the land, but retain the rights to all other minerals. Transferring these rights typically entitles the new owner to an easement—the right to enter the property and dig, drill, or in some other way reach the minerals. If the mining company is unsure of the quantity of the mineral it wants to extract, it may choose to lease the rights instead of buy them outright.

Leasing these rights is common practice for oil and gas companies. If a piece of property appears suitable for oil and gas production, the drilling company may give the landowner a down payment to allow subsurface mineral exploration. If the desired minerals are found in adequate quantities, extraction normally begins. The landowner typically receives a percentage-based royalty dependent upon the quantity of mineral extracted. If an inadequate quantity is discovered, the lease typically expires, but the landowner often retains the signing bonus along with the mineral interest.

In some areas of the United States, neighboring properties may be negatively impacted by a rights transfer. Oil can easily cross property lines if drilling is at a certain level or angle. Some states regulate this possibility by requiring mineral extraction companies to pay for mineral unitization, but many others have no restrictions. Landowners involved in personal or neighboring mineral interest purchases typically consult attorneys and negotiators specializing in mineral rights law.

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MarkIsGenius
Post 1

Nice article. I'll make sure to share this on my walls. Indeed, individuals with mineral rights or oil and gas royalties have the potential to secure a large sum of money if and when they choose to sell mineral rights. I actually have a neighbor who sold their minerals through DML Energy, a small firm that works in PA and OH. I think they are a Denver company but my neighbor was paid in 45 days, and was happy with their offer.

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