A mineral deed is a document that applies to the ownership of mineral resources under the earth’s surface. With a mineral deed, you can transfer the rights over the minerals to a separate party. It means that the same land can have separate owners above and underneath the surface.
This document works as sales evidence, but it doesn’t mention the title to the surface or above the land structures. So, when you’re buying a property, you don’t necessarily buy all the rights and available options for that property.
Why Understanding Mineral Deed is Important
Property dealing can be a complicated affair for some people. While the general assumption goes that buying a property means you have all the rights pertaining to it, some property owners look at these things differently.
As a result, an owner reserves the right to sell different property rights to different people.
So, as a buyer, if you are not getting any rights over the minerals and only buying over-the-surface property, there can be a significant difference in the buying cost. But you can only claim it if you know the basics of how a mineral deed works.
Where Does a Mineral Deed Apply?
Mineral deed applies to everything that’s under the land. The buyer may or may not extract the minerals, but more importantly, there is no mention of the title to the surface or any constructions on the property. But the deed provides certain rights to the mineral owners, such as:
- Right to enter the land.
- Right to improve the land portion from which minerals may be extracted. It includes the installation of machinery, pumps, and drills that will aid in the extraction process. However, there may be limitations in land occupation, as the mineral deed owner cannot take all the surface just for installing extraction equipment.
- Right to add third-party companies for mineral extraction
The seller may reserve the rights related to extraction and sales of the minerals, but it almost never happens. Generally, the new buyer earns at least a partial license to extract and sell the minerals.
Mineral Deed vs. Mineral Lease
Mineral Deed and mineral lease are two different things. In a mineral lease, the leasing period must be used to engage in development for oil and gas production. But, on the other hand, a mineral deed doesn’t require you to execute such developmental practices. So, it’s mainly up to the owner if they wish to extract minerals after earning the rights.
Likewise, a mineral deed gives the owner more authority than a royalty deed. In a royalty deed, the owner doesn’t have access to the land, and they cannot start extraction and sales on their own.
The owner has all the rights to extract and sell minerals. In case they involve a third party, they can earn a percentage of sales from the company. And once the lease expires, there is no effect on the ownership of the mineral resources.
One of the significant aspects of a mineral deed is that it limits the involvement of the surface owner in mineral extraction and sales. The surface landowner can not claim possession of the minerals or any rights related to those minerals.
If the surface owner didn’t know the mineral rights before, it doesn’t affect the rights of the mineral rights owner.
Different jurisdictions may apply to a mineral deed in other parts of the US. For instance, in Texas, a mineral deed clearly defines the area of the property that is sold to the new buyer. It mentions the total sold area and the corresponding geographical coordinates of the land.
Moreover, a mineral deed may also apply to a specified depth. For example, an owner may grant a mineral deed for oil and gas extraction up to 4,000 feet. Within the prescribed limits, the mineral rights owner can drill, mine, pump, and explore the land for minerals and energy reserves.
Beyond the specified depths, all rights pertaining to mining and extraction are reserved by the mineral’s original owner. However, it varies from case to case as some owners may not specify any depths and sell the whole thing to the new grantee.
So, if there are any specified depth limits, you can expect the landowner’s involvement to a certain extent.
Mineral Interest and Mineral Deed
If the mineral rights owner keeps the mineral interest idle, it does not lead to the ceasing of the mineral deed. However, the mineral interest may be terminated if there is no substantial production during a specified extraction period. Unlike some other deeds, a mineral deed can specify an exact interest. The court investigates the general intent of the involved parties to figure out the objective specified in a mineral deed.
The Benefits of Acquiring a Mineral Deed
When you acquire a mineral deed, you won’t need to buy the entire property to extract minerals from a potent piece of land.
The mineral deed conveys to you the right of individual and independent ownership of the minerals underneath the land, so you are in charge of everything related to its extraction and sales.
So, if you have your own extraction company or want to add in a third party, it gives you more financial and legal leverage.
Most of the time the party or parties with the mineral deed can lease the mineral rights to oil and gas extraction companies in exchange for royalties on the sale of the minerals. The royalties depend on a number of factors like the mineral reserves, depth of minerals, and price of minerals.
A mineral deed is a valuable document that may be overlooked at times simply because property owners don’t sufficiently understand it.
However, if you’re interested in mineral extraction and wish to sell or purchase property, knowledge of mineral deeds and their applicability can help you get better deals and rights for mineral extraction.
Remember, a mineral deed is your license for drilling, mining, and installing machinery to enhance extraction. So, having this essential knowledge will help you understand the extent of your rights as well.