What are Mineral Rights?
Mineral rights refer to the rights to exploit the minerals such as oil, gas, and precious minerals found underneath the surface of the Earth. In the past, the government had the mineral rights for the entire country however, to encourage settlement in the western part of the United States, the land that was sold to the public included mineral rights along with the surface rights. Surface rights are the rights to use the surface of the land, including water, trees, sand, and other minerals on the surface such as limestone. A problem that arises is that the mineral and surface rights of the land can be in 3 states.
Unified Estate: The mineral rights and surface rights are held together.
Split Estate: The mineral and surface rights have been separated and may have different owners; this is possible if someone chooses to sell their land and retain mineral rights and sell them further separately or someone chooses to keep the surface rights and sell the mineral rights off.
Fractional Ownership: A percentage of the mineral rights are owned by several parties.
The downside of selling off the mineral rights to your land is that the party with the mineral rights is considered the dominant party and you will have to provide it with access to some of the surface of your land in order to extract the minerals from the subsurface. This means that your land will get damaged to an extent and you may not be able to use it fully if the mineral rights owner decides that it wants to start extraction. This, however, is banned in a lot of communities and mining has to be done horizontally to access minerals underneath community areas. The opening to such mines is far away from residential areas due to the pollution and health risks associated with mining.
Fortunately, property owners in Texas are protected by the State of Texas Landowner’s Bill of Rights which allows the surface rights owners to make a surface waiver that makes certain areas off-limits for extraction. The bill also allows the landowners to claim compensation for the damage done to their land. Another option is to lease the surface rights to the extraction company in return for a monthly payment if you do not need to use the land. The extraction company also has to restore the land to a decent condition after they are done with it.
Who owns the Mineral Rights to your Land?
It is important to be very vigilant when purchasing land as, even though the papers might say that the land comes with both, the surface and mineral rights, that isn’t necessarily the case and it might be false information. Since this practice is the most common in Texas, if you’re considering looking for surface or mineral rights for sale in Texas, do hire an experienced lawyer. These lawyers take on the duty to track every single previous owner of the land and check if any of them severed the mineral and surface rights. If any one of them did so, they’re no longer sold together even if the papers claim as such.
Although you might be able to do the job yourself, a professional would better be able to tackle the technicalities of legal paperwork. The property’s land title records have to be carefully studied to obtain this information. These documents are generally available through the records offices of the local property appraisal authority or the county clerk’s office. In these documents, you not only have to check if the land has become a split or severed estate but also track down the current owner of the mineral rights and ensure that this individual has not further leased them to an extraction company as this has become a common practice these days.
How do you Sell Mineral Rights?
The mineral rights market in Texas works similarly to a stock market. It’s a great place for investment as the oil and gas market is booming and extraction companies are constantly on the lookout to lease more rights. Leasing your mineral rights instead of selling them is similar to renting them; it gives you the advantage of a limited commitment (generally 3 to 5 years), in return, you receive a royalty payment which is a percentage of the revenue from the oil and gas sold and you get to maintain your ownership status. On the downside, it depletes the value of the property and there is no guaranteed sale of oil and gas as we saw in the year 2020 when the markets crashed. Selling the land brings you a lump sum payment that can be used elsewhere, however; it is essentially a loss of an asset.
To sell or lease your rights, you have to contact a brokerage company that is willing to purchase these rights and trade them directly with extraction companies. As discussed above, you also have the option of leasing them and receiving a royalty, there are multiple different types of royalties i.e. royalty interest, overriding royalty interest, working interest, and non-participating royalty interest.