What are Mineral Rights?
Mineral rights are simply the ownership rights of any resource that is found beneath the surface of the earth. Essentially, these rights entitle the owner to anything below the property. This includes any valuable resource that can go through an extraction, selling, or useable as fuel.
Now that we have answered the definition of what are mineral rights, we can move on.
The United States of America is one of the few nations in the world in which citizens are able to acquire private mineral rights. In most other countries, the federal government automatically claims ownership of anything valuable found below the earth’s surface.
For oil and gas operations, mineral rights can be extremely valuable. Today, there are many questions that require answers in order to fully understand these rights and how they apply to specific scenarios. In this complete guide, we will outline everything you need to know about these rights in the United States.
Mineral Rights 101: Everything You Need to Know
Okay, let’s start with the easy stuff.
With mineral rights, owners typically take claim of:
- Crude oil
- Natural Gas
- And more.
If you own your mineral rights, then you can legally extract, sell, or use any of these resources. Many mineral rights owners sell or lease their property to an oil and gas company in order to extract the subsurface minerals. Learn more about mineral rights.
Surface Rights vs. Mineral Rights: Understanding the Difference
More than anything, these rights are confusing, comparable, and in a bundle with surface rights. As you may be able to guess by the name, surface rights are the ownership rights of a parcel of land, limited to the Earth’s surface.
Although they may be under the ownership of the same individual, surface rights and mineral rights entitle a property owner to different, specific parts of the property. Surface rights owners are generally entitled to:
- Build or modify structures
- Water rights
- Earthy materials (sand, limestone, gravel, etc)
If you own your surface rights, you may own your mineral rights. However, this is not always the case. Learn more about surface rights vs mineral rights.
How Do I Know If I Own These Rights?
Whether you have just purchased or inherited a piece of land, you may be wondering, “How do I know if I own my Mineral Rights?” Well, there are a few specific ways for you to verify the ownership of your property’s mineral rights.
First, check the deed. If there is documentation of your property, it will likely be in a listing as a “split” or “fee simple” estate. In a fee simple estate, you own your mineral rights. In a split estate, someone else owns these rights. The other party’s name and contact information should be under inclusion in the property deed.
If there is no paper trail to follow, or you simply want to check your deed’s legitimacy, there are a few different people you can contact to track down your land’s history. Depending on your location, it may be a good idea to contact a real estate lawyer, title agency, or deed office in order to legitimize the status of your rights.
Learn more about mineral rights ownership.
What Does Fee Simple Ownership Mean?
As we’ve alluded to above, fee simple ownership includes mineral rights and surface rights in one single contract. Fee simple is a legal term and is the most absolute (and most common) form of property ownership in the United States.
In a fee simple contract, the ownership of the entire estate is generally under by one person until selling, gifting, or bequeathing to another individual. If a fee simple owner decides to sell their mineral rights (or sell their property, but retain their mineral rights), then the land is transformed into a split estate.
Learn more about fee simple ownership rights.
What is a Split Estate for Oil and Gas Drilling?
In a split estate, a property’s surface rights and mineral rights are split between different individual owners. Split estates are very common on properties with valuable mineral rights. Split estates can divide these rights and surface rights ownership between two parties, or even divide these rights among many different owners.
Once the estate is split, the these rights and surface rights can transfer ownership independently of one another. For most oil and gas drilling sites, cooperation between both landowners is necessary for successful operation.
Learn more about split estates in oil and gas.
Are These Rights Valuable?
If you are looking for a short answer, then yes, these rights are valuable. Mineral rights that claim ownership of natural resources are subject to selling. It is for a large lump sum or leased in exchange for oil and gas royalties.
With that said, some of these rights can be worth virtually nothing. It is tough to claim that these rights are always going to be valuable because there are many parts of the country that do not contain valuable resources below the surface. Learn more about mineral rights valuation.
The Difference Between Producing and Non-Producing Mineral Rights
The difference between producing and non-producing mineral rights is the most important thing to know when beginning to explore the valuation of your property’s subsurface. It is very easy to determine which category your landfalls in.
If there are currently minerals under extraction and on the sell list from your property, then you own producing these rights. If there is no mining or drilling activity of any kind, then it is classified as non-producing.
Although these definitions are somewhat obvious, these terms are commonly used in these rights’ negotiations to help determine the value of the asset. Learn more about producing and non-producing mineral rights.
How Do I Determine the Value of These Rights?
If you own producing mineral rights, then it is fairly easy to determine their value. If resources are currently being sold from the property, the cash flow, drilling stages, property size, and expected lifetime royalties can be considered and analyzed using real numbers in real time.
On the other hand, non-producing are a bit harder to calculate. Non-producing have a value by the size of the plot, but also by the land’s history and surrounding areas. If there have been valuable resources explored or drilled on your land or in neighboring territories, then you may have potentially valuable non-producing.
Because price ranges for these rights vary immensely across the country and between different land sizes, it is nearly impossible to determine the value of your rights without contacting someone locally. Talking to an expert about your mineral rights is the absolute best way to determine their value. Learn more about how to determine the fair market value of mineral rights.
Can I Sell Land and Keep These Rights?
Yes! If you own a split estate or have modified your property’s deed to include one, then you can sell your land and keep your mineral rights. Although you will forfeit the property’s surface rights, you can still retain ownership of the subsurface rights.
Of course, without the mineral rights, the buying pool for the sale of your property may shrink. This is especially true if you are actively leasing your mineral rights to an oil and gas company. Learn more about selling land and retaining mineral rights.
What is the Average Price Per Acre for Mineral Rights?
In order to get a ballpark figure of how valuable your mineral rights maybe, one of the most popular ways is finding a local, average “price per acre.” If you know the approximate price per acre of your area’s mineral rights sales, then you can quickly calculate an estimate for the value of your property’s mineral rights.
Beyond simply your location, the average price per acre for your mineral rights may be specifically altered by a few specific factors. This includes existing or previous oil and operations, the number of wells on the property, any exploration done in determining the presence of valuable resources.
In residential or designated areas where drilling is prohibited, some mineral rights may essentially have no value at all. With that said, nationally, mineral rights sales can expect to be made at anywhere between $100 to $500 per acre. Learn more about the average price per acre for mineral rights.
How to Buy Mineral Rights
If you purchase a property under a fee simple agreement, then congratulations. You have bought mineral rights. Of course, you do not have to live on an oil field to purchase the mineral rights of valuable property. With mineral rights in states like Texas, Oklahoma, Colorado, Pennsylvania, and more, the acquisition of mineral rights can lead to a potentially great stream of income from an oil and gas lease or a larger outright sale.
Buying mineral rights can be summed up in four simple steps:
- Research sellers and scout land.
- Make offers.
- Negotiate and strike a deal.
- File the paperwork,
That’s right, mineral rights are not unlike any other ordinary property purchase. If you’re interested in potentially investing in mineral rights, you can read more on how to buy mineral rights and royalties.
How Long do Mineral Rights Last?
There is an old saying in the industry: mineral rights last as long as you do. If you are the official property owner of mineral rights, then you will remain so until you sell, gift, or will them to another person.
Do Mineral Rights Expire?
Of course, like all things, occasionally mineral rights records get lost or abandoned. In the case of orphaned mineral rights, the land may go back into possession by the government or other organizations.
In some cases, squatters or rightful surface owners can occupy land with an abandoned mineral rights estate. Depending on your state, abandoned mineral rights may revert to surface
rights owners after a fixed period of time. This could range anywhere from 1 to 20 years. Learn more about expiring mineral rights.
I Inherited Mineral Rights, Now What?
In the event of losing a close family member or friend, you may find yourself with a sudden mineral estate, unsure of what to do. Well essentially, there are three options. The first and most obvious option is to retain your estate. Mineral rights can be passed down from generation to generation.
However, with mineral rights ownership comes a potential financial gain. If your mineral rights are valuable, then you can choose to sell or lease your land for a large lump sum or future oil and gas royalty payments. Learn more about willed, bequeathed, and inherited mineral rights.
How to Transfer Inherited Mineral Rights
Of course, if you are the rightful heir of a mineral rights estate, you will need to transfer the ownership to your name. To do so, simply verify the will of the deceased and file the associated paperwork with your local deed office. Read more on transferring inherited mineral rights.
Do you have to pay property tax on These Rights?
These rights are an asset, just like your house, your car, and even your couch. With that said, you don’t have to pay property tax on your car or your couch. In the same vein, in most states, you do not need to pay property tax on non-producing mineral rights.
Usually, if you are not actively in an oil and gas lease, then you will not need to pay property tax on these type of rights. However, if you are currently receiving oil and gas royalties from resources produced on your property, then you will have to pay other associated taxes.
Learn more about property tax on mineral rights.
Ways to Connect With Other Mineral Rights Owners
Whether you have a question about your specific region or want to connect with mineral rights owners to purchase or sell property, there are many resources available for you to utilize. Digitally, forums are available to browse or participate. In your state, there are probably experts or simply property owners that have taken an active part in their ownership.