Your Helpful Bottom Line on How Mineral Rights Work

Your Helpful Bottom Line on How Mineral Rights Work

Mineral Rights

How do Mineral Rights work? What Are Mineral Rights? Who Owns Mineral Rights to My Property?

I’m going to answer all these questions, and you’re going to come out of this a clear idea and understanding of how Mineral Rights work and how they affect your land ownership. Before I can do that, we need to understand exactly what Mineral Rights are and why they were created.


What are Mineral Rights and Surface Rights?

To own the Mineral Rights to property means the holder of those rights has the authority to exploit, mine and produce any minerals found in that property. The owner is free to sell, donate, or ignore the minerals. Minerals can refer to commodities like gas, oil, coal, ores, stones, sands, and salts.

In simple speak, Mineral Rights refer to everything below what the eye can see. It’s all the layers beneath. Surface Rights refer to everything that the eye can see. The land itself, the vegetation on it, any plants on it, the entire surface of the land.

The problem with Mineral Rights and Surface Rights is that they aren’t necessarily sold together. Often the Mineral, Water, and Timber Rights are sold separate from the land itself - they’ve previously been severed. You may sometimes hear this referred as a ‘split estate’.

 

Quick History – When Did Mineral Rights Start?

In colonial times (1600s), land possession in the United States was under English common law. This meant that Mineral Rights passed ownership with the Surface Rights when property was sold or changed owners.

This was standard practice until the early 1900s when Texas started allowing property owners to sell Mineral Rights (made official with The Relinquishment Act of 1919). The federal government shortly followed with The Mineral Leasing Act of 1920, which allowed the Bureau of Land Management to lease out federal lands for access to extract coal, phosphate, potash and other valuable minerals underneath.

The result of these acts now is that mid 2019 as I write this, an individual can own Mineral Rights separate from the Surface Rights of a property. This is not common practice in other countries.

This is really great for individual landowners in the US, it gives people an extra way to make money. But there are a lot of difficulties that come with that, too. Which leads us to our next question.

 

Who Owns Mineral Rights?

Speaking to buying and selling land in the US, it is not a given that the Mineral Rights and Surface Rights are sold together. It is not a guarantee that when you buy land, you own down to the core of the earth.

Thankfully, you can find out if you own the Mineral Rights to your property. The first place you should check is the County’s Clerk of Records office. This office has records of all types of transactions in the county, including deed transfers. You can often do your search completely online, and most counties have images of deeds you can access (usually free, but if not it’s a couple bucks to access a copy of a deed). If the county doesn’t have an online database, you will need to go into the Clerk’s office to access their records.

To do your search with the Clerk’s office, you need your property parcel number (this is also referred to as the APN). With your APN and property Legal Description, you can search the clerk’s online database and pull up the history of all transactions around your property. If there’s no online database, you will still need the APN and Legal Description to pull up records in the Clerk’s office.

You can see an example of a Mineral Deed here. This would be the type of document you would come across in your search at the Clerk’s office.

 Where Are Mineral Rights Recorded?

You’re now going to establish what’s called a ‘chain of title’. This means that you are going to create a chain of events, going back through time, to track down the ownership of the Mineral Rights, and how they’ve changed owners over the years.

I recommend starting with your ownership and the year you bought the property, and moving backward in time from there. Check your deed that gave you title to the property and see if it mentions anything about Mineral Rights being transferred. If you can’t find it, don’t worry. It’s not common these days for Mineral Rights to be transferred with the deed title.

You can use your deed to see who you bought the property from (if you don’t remember), and then search that previous owner’s name in the clerk’s database. You can then pull up their information, and see a copy of their deed and who they bought the property from. Read each deed very carefully to see if the property rights were transferred with the title. Unless it’s explicitly and clearly stated that the Mineral Rights are not included with the sale of the property, you can safely assume that they’re sold and transferred together.

You will have to continue this process until you track down the first time the Mineral Rights were transferred separate from the Surface Rights of the property. You may have to go back fifty or a hundred years, so be prepared.

I know this sounds like a difficult task, and it does require some research and detailed attention. If this makes you feel nervous and you don’t want to get into the weeds of it, you can also use a title company to do a Mineral Rights Search (although this could be very costly). I would recommend hiring a title company to help you if you have never done a title search before.

There is an extra tricky part to this: gaps in the title chain. A gap is when you can’t determine from county records how someone came into ownership of Mineral or Surface Rights. Somewhere along the line, deeds will stop stating who owns the Mineral Rights. Sometimes a deed will be wrong, and say that the Mineral Rights are transferred with the sale.

If any single previous deed does not include the transfer of mineral rights, you can assume from that point forward that the Mineral Rights are separate from the Surface Rights. Regardless of what a more recent deed says.

For example, if in 1910 John Smith deed his property to a Jacob Wall, but John held back the Mineral Rights. All transactions onwards from that date in 1910 transfer Mineral Rights and Surface Rights as separate entities. Jacob Wall owns the Surface Rights. John Smith retained ownership of the Mineral Rights, and is free to do with those what he wishes. If ten years later, in 1920 Jacob Wall sold his property to someone else, he cannot sell the Mineral Rights. Even if Jacob included them in the deed, they were not his to sell and the next owner does not receive them with the property transfer.

 

How do Mineral Rights Work? Who Owns Mineral Rights?

You have a general idea of what Mineral Rights and Surface Rights are, and how to determine who owns them. So, how do they affect you?

If you own a property’s Surface Rights, but not the Mineral Rights, and your land happens to have valuable commodities beneath the ground, you may be in an uphill battle. This is because Mineral Rights Trump Surface Rights.

This may not be the case 100% of the time, there are always special circumstances - but it is the norm. This can cause a lot of tension if the Mineral Rights owner wants access to the property, and the Surface Rights owner is resisting.

A Mineral Rights owner should approach a Surface Rights owner with an access agreement, which would detail out how the property is accessed and when. It may even have a compensation offer (if it doesn’t – negotiate one!).

It feels frustrating, but as the Surface Rights owner you can’t keep the Mineral Rights owner off of your land. And odds are if you wanted to escalate your battle and take things to a higher court, you will likely lose. You as the Surface Rights owner should try to be cooperative. This is your best alternative.

You should instead focus on when access will be provided and how, and getting yourself great compensation. I recommend hiring a lawyer or paralegal to assist you with the access agreement.

 

Why Sell or Lease Mineral Rights?

To get some cash flow! If you happen to own the Mineral Rights to a property, you can lease them if you don’t want to extract and explore yourself. This can be difficult to document properly, especially if you’re considering leasing to a larger company who has a team of lawyers to make sure they get the best deal. It may be worth it for you to hire a lawyer to make sure the lease has an expiry date that both parties obey.

Some areas of the US are currently blessed with valuable minerals. If you own land in one of these states, you may be in a good position to lease your rights and make some money. Check out the list below to find out:

Copper – Arizona, New Mexico, Utah, Nevada

Feldspar – North Carolina, Virginia, California, Oklahoma, Idaho, Georgia, South Dakota

Lithium – Nevada, North Carolina

Silver – Alaska, Idaho, Nevada

Gold – Nevada, Alaska, Colorado

Iron – Michigan, Minnesota, Utah

Natural Gas – Texas, Louisiana, Pennsylvania, Oklahoma, Ohio

How Do Mineral Rights Affect Your Decision to Buy Land?

You might be concerned after reading all this. You shouldn’t be hesitant to continue with your land purchase. In most cases, unless you’re looking to buy property next to an active mine or drilling site, your Surface Rights will be enough.

If you’re looking to buy residential property in a developed area, you shouldn’t hold back because the Mineral Rights aren’t included. Even if you’re looking to buy a 40 or 80-acre plot in the mid-west, I still wouldn’t hesitate with the purchase.

Just know before you move forward that purchasing the Surface Rights does not automatically mean you owe the Mineral Rights. It may turn out that you do, but it’s not a given.

 

Your Bottom Line on Mineral Rights

Mineral Rights are below the ground, and Surface Rights are the ground and land itself. You can’t assume that when you purchase land, the Mineral Rights are automatically yours as well. You can check this by establishing a chain of title, or hiring a title company to do a Mineral Rights search for you.

Have you ever performed a Mineral Rights Search? Do you currently lease or own the Mineral Rights to a property? I’d be interested to know how it’s working out for you!

 

The information in this article should not be interpreted as legal advice. I’m not a lawyer, and if you’re dealing with this issue I recommend getting help from a paralegal to find out what your options are. It can be difficult and overwhelming to do a Mineral Rights search, especially to someone without experience. To be certain of what rights are included with your property, a local title agency or paralegal can help you. Leasing rights and determining access can sometimes escalate into a very difficult and troubling situation, so it’s best to get professional advice.

 

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