How To Understand Your Mineral Rights
Andrew Dehan5-minute read
February 18, 2023
If you’re moving to an area with nearby mining operations, knowing what’s going on beneath your property is crucial. Even if you’re not interested in being an oil prospector, knowing the rights you may or may not have when buying a property could save you some trouble. Who knows, with any luck, you could hold the right to a literal gold mine.
Read on to learn what mineral rights are and what’s included.
What Are Mineral Rights?
Mineral rights are ownership rights that allow the owner the right to exploit minerals from underneath a property. The rights refer to solid and liquid minerals, such as gold and oil. Mineral rights can be separate from surface rights and are not always possessed by the property owner.
Because mineral rights can be separate from surface level ownership, it’s important to know what the rights are when purchasing real estate. The owner of the mineral rights can exploit the minerals or sell the authority to do so without having ownership interest in the property.
What Minerals Are Included?
When you hear “minerals,” you may be thinking of solids, but the truth is that mineral rights cover liquids and gasses too. Note that these can change based on laws and taxation. Here’s a short list of what’s usually included:
- Natural gases
- Precious metals (Gold, silver, mercury, etc.)
- Non-precious or semi-precious metals (Aluminum, copper, etc.)
- Rare earth elements
What Minerals Are Not Included?
Several minerals aren’t included in mineral rights. Here are some of the common ones not included:
- Subsurface water
How Do Mineral Rights Work?
Owners of mineral rights can explore and exploit the area they own the rights to for minerals, or they can sell the rights to private companies or organizations to exploit and explore. When selling rights, rights owners can take payment in the form of royalties, a lease or shut-in payments (when a well capable of producing is not utilized).
There are typically certain provisions that occur in these sales agreements. These provisions lay out the sales agreement and can operate like the contingencies in home sales. A few common provisions include:
- Conveyance: Outlining the price, specific minerals, net profit interests and royalty interests produced from the property.
- Diligence: A provision that creates a time period that restricts the seller from selling the rights to someone else while the buyer is running the title. It also provides a provision for how and when the sale price can be adjusted if necessary. This provision allows the buyer to back out of the sale if there are problems with the title or the rights.
- Closing: This provision lays out details like the closing type, time, costs and taxes.
How Mineral Rights Are Held
There are a few different ways that mineral rights are held. The combination of the mineral rights and the surface rights is referred to as an estate. How these estates are held can vary from location to location.
Here are the types of estates:
- Unified Estate: Mineral and surface rights are tied together.
- Severed Estate: Ownership of mineral and surface rights can be separate.
- Fractional Estate: One estate owns a portion of the mineral rights.
As with many laws regarding property and rights, the circumstances around who owns what can vary. Different countries outside the U.S. handle mineral rights differently. And in the U.S., different states have their own policies regarding mineral rights.
How these rights are taxed, who owns them and to what degree can change depending on locale. Some states may have regulated zones for exploiting these rights, especially when it comes to oil and gas.
Get approved to buy a home.
Rocket Mortgage® lets you get to house hunting sooner.
Surface Rights Vs. Mineral Rights
Surface rights are what you own on the surface of the property. These include the space, the buildings and the landscaping. Mineral rights, on the other hand, cover the specific resources beneath the surface.
In areas designated for mining, it’s common for surface rights and mineral rights to be separate. You can be in a situation where you own the surface rights but not the mineral rights. This is referred to as a severed estate (see section on how mineral rights are held above).
How To Search For Mineral Rights Records
Mineral rights records are outlined in a variety of places. If you own the property, you should study your land title records to mitigate the risk of losing ownership to mineral rights. When you bought the property, it’s likely that a title search was performed by a title company. Assessing those records, as well as any title insurance you bought, is another good place start.
Commonly Asked Questions Regarding Mineral Rights
So, do these rights transfer with the property? Or are they separate? Here are a few answers to some commonly asked questions around mineral rights.
Do Mineral Rights Transfer With Property?
Whether mineral rights transfer with the property depends on the estate type. If it’s a severed estate, surface rights and mineral rights are separate and do not transfer together. However, if it’s a unified estate, the land and the mineral rights can be conveyed with the property.
Do Mineral Rights Expire?
Yes, mineral rights can expire. There’s no one answer to when they’ll expire or how long they last. All agreements have different term lengths. If you’re selling mineral rights, you can set the term length. If someone owns the mineral rights on a property you own the surface rights to, there may be an expiration date that’s different.
Can I Buy The Mineral Rights To A Property I Don’t Own?
Yes, you can buy the mineral rights for a property you don’t own. This is referred to as a severed estate, where someone owns the property surface rights with the mineral rights being separate. The rising value of oil and minerals have increased the popularity of investing in the mineral rights but not the property rights.
To research how to attain these rights, look at the county’s courthouse. They typically have a deed record of mineral rights. From there you can contact the owners of the rights. Another way to purchase rights is to do a quick internet search on rights for sale.
What Are The Most Prevalent Minerals For Mining?
The most prevalent minerals for mining in the U.S. are oil and gas. States like Texas, North Dakota, Alaska, California, New Mexico, Oklahoma, Colorado, Utah and Louisiana have large oil and gas reserves.
Another prominent mineral is coal. States like Wyoming, West Virginia, Kentucky and Pennsylvania have large coal mining operations.
A mineral rising in demand is lithium. Lithium is used heavily in batteries for electronics. However, there aren’t large lithium mining operations in the U.S.
How To Determine If There Are Valuable Minerals On Your Property
If you think there may be valuable minerals on your property, you may not be the only one. Most areas with mineral deposits have designated regions for mining. If you live in an area with mining or oil drilling, chances are companies have hired geologists to examine if the area has the right elements for exploiting minerals.
You can hire a geologist or land surveyor to help you determine if there’s something of value on your land. You can also look at mineral rights listings to see if your property has separate mineral rights for sale.
The Bottom Line: Know Your Mineral Rights
It’s important to know the mineral rights of your property. If you own the rights, they can become a reliable source of income. If someone else owns the rights, they can remove valuable minerals from under your feet, literally.
If you’re buying property in an area known for mining or oil drilling, you’ll want to know what kind of estate you’re buying and who owns the mineral rights to the property.
Learn what you can about the property before buying a house so there are no surprises.
Viewing 1 - 3 of 3
Title Endorsements: What They Are And Why You Need Them
Home Buying - 4-minute read
Lauren Nowacki - February 21, 2023
There’s no horror like purchasing a home only to find out the title is cloudy. Learn more about how title endorsements extend your sense of security.
Property Line Disputes: What They Are And How To Resolve Them
Refinancing - 4-minute read
Andrew Dehan - February 22, 2023
Disputes over boundaries between properties might pop up among homeowners. Read our article about types of property line disputes and how to settle them.