Mineral Rights Leasing

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Are you a landowner seeking to capitalize on the booming oil industry in your area, but don't know where to start?

Mineral Rights Leasing 

The mineral, oil, and mining industry is aggressively progressing. It's not just the U.S. The increasing importance of the energy and mining industry is becoming very evident worldwide. The growth of developing countries such as China and India further shows us that valuable commodities like oil, steel, and gold are in great demand and becoming very scarce.

With the demand increasing and the resources dropping, every energy/mining company in the U.S. is actively looking for property holdings that hold such valuable commodities.

What Are Mineral Rights? 

Mineral rights refer to the legal rights to explore for and produce the resources below the surface. Ownership of mineral rights gives the right to extract valuable commodities such as gold, silver, uranium, copper, nickel, palladium, aluminum, iron, lead, molybdenum, platinum, tungsten, zinc, and diamonds.

In the United States, the most common and most important uses of mineral rights include the rights to energy sources such as coal, oil, natural gas, and geothermal energy.

Mineral Rights Is Different From Surface Rights! 

People sometimes confuse mineral rights with surface rights. They're not the same thing!

Mineral rights are separate from surface rights. Surface rights are the legal rights to work on the surface of the land, and only pertain to ownership on the surface. It is easy to separate mineral rights and surface rights. In fact, many mineral right owners retained their mineral rights long after their surface rights were sold. Once retained, mineral rights can be owned forever (except in Louisiana where "prescriptions" dictate that retained mineral rights only last 10 years once the surface has been sold).

The United States of America is the only country in the world that has granted the rights to own minerals to private parties. This Law has led to wonderful prosperity in the United States. It is estimated that over 1 million private land owners in America have royalty interests on their property today! Often, mineral rights are divided many times with each owner owning only a fraction of the interest in said property.

Do you have THE Property?

If you have a property that happens to be an abundant source of energy and minerals, you can expect a chance to be wealthy!

Energy and mining companies are looking for properties that keep valuable minerals in them. Under the right conditions, you can reap some profit from your property!

Mineral Rights Leasing 

A mineral rights lease is a formal agreement between two or more parties where the owner of the land grants another party the right to drill or mine and produce commodities such as oil and gold. In exchange, the property owner gets an up front bonus payment, payment for surface damages(if applicable), and a royalty for every product sold. In order for your property to be leased, the energy/mining company must get signatures from each owner on the title.

Articles on Mineral Rights Leasing 

Here are my articles on leasing mineral rights.
What Is Mineral Rights Leasing?
This article focuses on the general definition of mineral rights leasing, and extends to the nature of mineral rights transactions.
Oil and Gas Leasing
This article tells the difference between oil and gas leasing.

Reminders When Buying Property With Mineral Rights 

  • Check first whether the property you're buying really does have mineral deposits underneath. You can ask for help from a local geology surveyor for this. You can ask around real estate agents, developers, or lawyers for any recommended surveyor.
  • Local and state laws regarding mineral rights are usually the same in many states. But it won't hurt to check just to make sure. The state you're in may have different definitions and elements for mineral rights purchase and extraction. Ask help from the local land commission or a real estate lawyer you know in the area.
  • When creating the contract for the purchase of the land and the mineral rights, it is important to write down the minerals included in the purchase. Include the sub-surface extractions and clear up any issues regarding the price of the mineral rights.
  • The seller might want to keep some of the minerals of the property. In order to obtain all the mineral rights, you'll have to negotiate the price of the mineral upward. You should define the minerals and rights included in the transaction clearly to avoid future disputes.

State and Local Laws  

... for Mineral Rights and Mineral Rights Leasing

Most states have laws and regulations pertaining to mineral rights ownership, transactions, and extraction. There are laws and regulations that emphasizes the limitations of a mining company's actions during extraction, for example. These laws are put down to help protect the environment and the parties involved. Both the mineral rights owner and the surface rights owner should be aware of these laws to avoid future problems and disagreements. To make matter clearer for both parties, lawyers and legal assistance should be present.

Obviously, mineral rights and mineral rights transactions are a very complex situation. They require a lot of research, a lot of counsel, and a lot of effort, time, and money. The most important thing to remember is to always ask about the rights and seek legal assistance.

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Definition of Terms 

There are terms that you would come across when in a mineral rights transaction.
  • Absolute ownership: the theory that minerals such as oil and gas are fully owned in place before they are extracted and reduced to possession; title to oil and gas may be lost by legitimate drainage and by the rule of capture
  • Abstract company: a private company in the business of preparing abstracts of title and performing related services
  • Acreage contribution: acreage owned in the vicinity of a test being drilled by another party and contributed to the driller of the well in return for information obtained by drilling
  • Adverse possession: a method of asserting and gaining title to property against other claimants, including the record owner; the claim through adverse possession must include certain acts, as required by statute, over an uninterrupted interval of time; it is also open, notorious, and hostile
  • Assignment clause: a clause in any legal instrument that allows either party to the contract to assign all or part of his/her interest to others
  • Authority for expenditure: an estimate of costs prepared by a lease operator and sent to non-operators for their approval before work begins; this estimate is normally used in connection with well drilling operations
  • Bonus consideration: a cash payment by the lessee for the extraction of an oil and gas lease by the mineral owner, usually given in dollars per acre; sometimes an oil payment or royalty is reserved as a bonus by the lessor
  • Habendum clause: in an oil and gas lease, this clause fixes the duration of the lessee's interest in both a primary and secondary term; it is also refereed to as a term clause
  • Joint operating agreement: a contract in which two or more co-owners of the operating rights in a tract of land join together to share costs of exploration and possible development
  • Joint venture: a business undertaking in which the parties in the agreement share control, profit, losses, and liability
  • Lease purchase agreement: an agreement between companies for the purchase by one company of a block of the other companies' leases
  • Net revenue interest: the portion of oil and gas production money paid after all operating and development costs are paid
  • Offset well: a well drilled on a tract of land next to another owner's tract on which there is a producing well
  • Oil payment: a non-operating interest in oil and gas for one or more leases; it provides to the owner a fractional share of the oil and gas produced that are free of the costs of production; it terminates when a specified dollar amount or volume of production has occurred
  • Paid-up lease: an oil and gas lease that is paid up through the primary term; it is part of when the lease is first acquired
  • Production payment: a cost free percentage of the working interest that ends when a specified amount of money or number of barrels has been reached
  • Royalty: the part of the oil, gas, and minerals or their cash value paid by the lessee to the lessor based on a percentage of the gross production from the property free and clear of all costs except taxes
  • Royalty clause: the clause that established the percentage of production paid to the lessor

More Articles on Mineral Rights 

How to Sell Mineral Rights
Here are 5 simple steps on how to sell your mineral rights.
Leasing Your Land For Oil Or Natural Gas Exploration
This article contains the 5 steps to oil and natural gas leasing.
Mineral Rights and Mineral Rights Transactions
This article covers the basics of mineral rights and mineral rights transactions.

Blog Posts from Google 

Apartheid President's grandson tackles mineral rights law
Vorster wanted to buy the mineral rights, worth between R1.5m and R2m, from his mother, but the deal could not go ahead because the mineral rights had been ...
Ventana stock falls on dispute, in talks to sell
TORONTO, Nov 27 (Reuters) - Shares of Ventana Gold Corp dropped 16 percent on Friday after the company said the local owner of the mineral rights at ...
Regs mandate more info. for ND oil-patch landowners
In western North Dakota's oil patch, property owners often do not own the mineral rights to their land. The new package of oil and gas regulations is ...
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