Important points
Mineral rights define who owns underground resources such as oil, gas, coal, and precious metals. If your mineral rights are lost or sold, it can affect your property value and bargaining power when selling your home.
Ownership of mineral rights can be separate from surface rights.
Before buying or selling real estate, it is essential to know who owns the mineral rights.
States such as Texas, Oklahoma, Colorado, North Dakota, and Pennsylvania have the most active mineral rights markets.
Many people think that owning land means owning everything that’s underground, but that’s not necessarily true. In some cases, mineral rights, including natural resources such as oil, gas, and precious metals, may be owned separately from the land itself.
Do you remember the opening scene of “The Beverly Hillbillies” where Uncle Jed says, “We were shooting food and oil came out of the ground”? Oils, namely black gold and Texas tea. We all wish we could get rich quick and become millionaires overnight. However, when purchasing property or land, it is essential to understand what you actually own before you find yourself in a similar situation.
This article details how mineral rights work, why they are important, and how to manipulate or negotiate them when buying or selling real estate.
What are mineral rights?
Mineral rights are legal interests that give the owner the power to explore, extract, or sell underground minerals. Surface rights give the owner the right to control the surface of the land for living, building, and farming.
Real estate may include both surface and mineral rights, and these rights may be divided into separate titles. When mineral rights are severed, the mineral owner retains the legal authority to access underground resources, even if someone else owns the surface land.
This concept is common in resource-rich states such as Texas, Oklahoma, and North Dakota.
What minerals are not included?
Some minerals are not included in mineral rights. Common examples are:
Limestone Sand and gravel Groundwater
Rules vary by location, so check with your real estate attorney or local land office if you are unsure whether you are covered by mineral rights.
Do I own mineral rights to my property?
Ownership of property does not automatically include mineral rights. These rights may have been sold, leased, or reserved by previous owners decades ago.
Fact: According to Rocket Mortgage, for a mineral rights transfer to be valid, it must be recorded in the county land records.
If you own a real estate deed, check for language such as “All Mineral Rights Transferred” or “Exceptions and Reserved Mineral Rights.”
To verify ownership, order a title search or consult Landman, an expert in investigating mineral ownership history.
How to determine who owns the mineral rights to your property
Ownership of mineral rights can be determined through public and professional resources.
County Clerk or Recorder’s Office: Property deeds and mineral transportation are publicly recorded. Title Company: A title search may reveal ownership of the cut mineral. State geological surveys: Many states maintain online databases of oil, gas, and mineral activity. Free Mineral Rights Search: Some websites offer search tools, but they are often incomplete. Always check your results with official records.
How mineral rights work
Owning mineral rights allows you to explore, extract, or profit from the natural resources beneath your land, such as oil, gas, and precious metals. Some mineral rights owners choose to sell or lease these rights to companies that have the means to explore and develop the area.
When selling or leasing mineral rights, the owner typically receives compensation through royalties, lease payments, or closure payments (paid when a well that could produce a resource is temporarily idle). Understanding how these contracts work will help you protect your investment and maximize your returns.
Main provisions of mineral rights sales contract
Mineral rights sales contracts often include detailed clauses outlining the terms of the deal, similar to contingencies in a traditional home sale. These terms clarify the responsibilities, deadlines, and conditions for proceeding with a sale.
Common provisions include:
Conveyance: Define price, specific minerals covered, net income or royalty interest. Diligence: Set a deadline for buyers to review the title and allow for cancellation if problems arise. Closing: Details how and when the transaction will be completed, including costs and taxes.
How to hold mineral rights
Mineral rights and surface rights together are called real estate. How these rights are structured depends on location and ownership history.
There are three main ways to hold mineral rights.
Integrated property: surface rights and mineral rights are owned together. Separate property: Ownership of mineral rights and surface rights are separated. Fractional property: Multiple owners share a portion of the mineral rights.
Special circumstances and state differences
In many parts of the United States, particularly in energy-producing states such as Texas, Oklahoma, Pennsylvania, Louisiana, Colorado, and New Mexico, it is common for mineral rights to be separated from surface rights. This often stems from decades of oil, gas, and coal development, where landowners sold or leased the subsurface rights but retained title to the above-ground land.
If you are purchasing property in one of these states, do not assume that the deed includes mineral rights. Always check ownership before making an offer to avoid complications later.
Some states have their own disclosure requirements. For example, North Carolina requires sellers to file mandatory disclosure statements regarding mineral and oil and gas rights at closing. This form clarifies whether the mineral rights have already been severed or will be severed prior to the sale.
How to negotiate mineral rights
Negotiating mineral rights can be complex, but understanding the key factors that influence value can help ensure a fair deal. Preparation and professional guidance are essential for both buyers and sellers.
Tips for effective negotiation:
Know your market value: Find out the current lease and royalty rates in your area. Understand your leverage: Landowners in high-demand areas or near active wells have more bargaining power. Negotiate payment terms: Discuss royalty percentages, lease terms, and renewal options. Protect surface rights: Include provisions that limit where and how excavation may occur. Seek professional help: Hire a land manager, mineral rights attorney, or appraiser to guide you.
Successful negotiations can balance fair compensation with clear terms that protect both landowner and buyer.
How to protect yourself when buying property with mineral rights
Whether you are purchasing property in a high production area or an area with little drilling activity, take the following steps to protect your investment.
Read Disclosures: Carefully review the state-required mineral rights forms. Check the rating. Make sure it reflects whether the mineral rights are included or severed. Include in the contract: Specify in writing which rights are being transferred (surface, mineral, or both). Seek professional guidance: Consult a real estate attorney who is familiar with local mineral laws.
FAQ
How do I find out who owns the mineral rights to my property?
To track mineral ownership, check with your county recorder’s office, hire a title company, or talk to the landowner.
Do I own mineral rights to my property?
Not necessarily. Mineral rights can be owned separately from surface rights. Check the deed and title history for confirmation.
Can I do a free mineral rights search?
Yes, but free searches are often incomplete. Be sure to check official county or state land records.
Why does the seller retain the mineral rights?
To preserve potential income from resource extraction and future royalties.
What are the risks of owning mineral rights?
liability, legal disputes and market price fluctuations;
conclusion
Mineral rights can have a significant impact on the value, use, and negotiability of real estate.
When real estate includes mineral rights, it often has great potential for long-term income and resale value, especially in areas with active oil, gas, or mining activity.
However, if the mineral rights are severed or sold, the use of the property may be restricted. For example, a buyer may not be able to drill wells, lease them to energy companies, or prevent future mineral development nearby. If this happens, the value of the property may decline and financing may become difficult.
Before buying or selling, check title records to see if any mineral rights are included, and consult a real estate attorney or land manager. These professionals can help you interpret lease terms, royalty agreements, and potential encumbrances regarding rights. Clarifying ownership early protects your investment and ensures smoother transactions.
