Do Mineral Rights Expire?
Mineral rights are considered to be real property. Therefore, people who own these rights should consider the same to be an asset, as they can use the mineral rights for their benefit.
However, it is important to note that the expiration period for mineral rights differs based on the agreement. So, there’s no single answer for whether and when mineral rights expire. Below, we explain this in detail.
What Are Mineral Rights?
Mineral rights are the rights to explore and use a property to extract minerals. Mineral rights can be sold, traded, inherited, or retained by their owners. They can be separated from the surface rights and are often leased to mining companies for a specific time before they must be relinquished.
Mineral rights typically include oil, gas, coal, and other minerals. The mineral rights owner will receive a royalty for any of these resources extracted from the property.
The terms of the agreement between a mineral rights holder and a mining company will dictate how much money is exchanged for the right to extract minerals from the land. It will also determine how much of the extracted materials must be returned to its owner.
Even when the land owner sells the land, they can still retain their mineral rights. In this case, they enter a split estate contract, which means that the surface rights are sold to one party, and the minerals rights stay with the previous owner.
Do Mineral Rights Expire?
The length of a mineral rights lease varies but can last for two to 20 years. How long the lease lasts depends on the terms and conditions of the agreement. When the lease expires, the mineral rights return to the owner.
In some cases, mineral rights may be forfeited if the owner does not renew their lease or fail to pay necessary fees. Likewise, a government agency can take control of mineral rights if they are not properly maintained.
Terms of Mineral Rights Agreements
Typically, mineral rights agreements have two terms. There are:
- Primary Term: The primary term is the length of time that the lease holds. It is also known as the granting period or leasing period.
- Secondary Term: The secondary term is how long the lease can be extended and renewed.
In some cases, mineral rights agreements have a clause that allows for automatic renewal. That means that once the primary term of the agreement has ended, it can continue to be renewed unless either party provides written notice prior to the end of the lease.
When mineral rights agreements do not have an automatic renewal clause, the owners must renegotiate and renew their agreement. The lease expires if no producing or drilling activity has taken place on the land by the end of the primary term.
However, if production or drilling is going on, the contract extends to the secondary term. The production and drilling can go on as long as they do not lapse for 60 or 90 days, depending on the law of the state.
Can Mineral Rights Expire Via Deed Language?
The deed language is the legal document that governs the mineral rights lease. It outlines the conditions of the agreement, including how long it lasts and when it expires.
Suppose Seller X sells the land to Buyer Y. The deed language says that the mineral rights of Buyer Y will be terminated and reverted to Seller X after 20 years or when the well stops producing gas or oil, whichever comes first.
Let’s say Buyer Y later sells to Buyer W. However, they do not include any clause about the reversion of mineral rights in the deed language. If the well stops production or 20 years have passed, the mineral rights will be reverted to Seller X, regardless of whether Buyer W knew about the expiration clause or not.
The bottom line is that the deed language will always take precedence over any verbal agreement, so it’s important for buyers to read the deed language carefully and understand what it says about the expiration of mineral rights. It will help them avoid any unpleasant surprises in the future.
What Are Unclaimed Mineral Rights?
Unclaimed mineral rights are mineral rights that have not been claimed by anyone. They may be owned by the state or federal government or may simply be unowned or abandoned.
Often, the mineral rights for a particular piece of land may have been sold multiple times over the years and forgotten about. As a result, the mineral rights may have lapsed and become unclaimed.
For example, if an operator does not pay a mineral rights owner for a certain duration (set by state law), they must escheat the payment to the state. This means that the mineral rights become the property of the state, and anyone wishing to claim them must do so through the appropriate process.
What to do If Your Mineral Rights Have Expired?
Let’s say that your mineral rights have expired, and you need to take action. First, determine if the minerals are leased or owned outright. If they are leased, contact the mineral rights owner to inquire about renewing the lease.
If you own them outright, you’ll need to decide whether or not to sell them. If you decide to sell, several options are available, including online auctions, mineral rights exchanges, and private sales.
However, it’s best to consult a professional if you plan to lease your mineral rights. Meanwhile, if you want to learn about the average price for mineral rights per acre, you’ll find the information here.
In rare cases, mineral rights reservations may be enacted in some regions. Per these, when a large company sells its mineral rights, the ownership transfers to the new owners. But a part of it also goes for federal reservation.
Simply put, mineral rights reservations are a way to ensure that the land and its resources will be preserved for future generations. Such rights do not expire but remain in effect as long as the conditions outlined in the contract are adhered to.