Mineral Rights Laws
If you own land that may have minerals such as oil, gas, coal or copper underneath the surface--or if you wish to buy or lease mineral rights either as an investment or in order to extract them--then you need to understand the basics of mineral rights law and how mineral rights agreement are structured. This article provides an overview of the basics of mineral rights law and practice in the United States.
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Legal Sovereign
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Unlike the law of most countries, in the United States most mineral rights are governed by state law. In some cases local law is applicable as well. Federal law applies to mineral rights underneath federal lands and in some cases to private land that was originally owned by the federal government. The laws governing mineral rights differ, particularly between the eastern and western parts of the United States.
Ownership of Mineral Rights
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Generally, the minerals under private property are owned by the owner of the surface. However, two major exceptions exist. First, the owner (or previous owner) of the property may have sold mineral rights to someone else (this should be recorded on the property deed). The second exception is where the land was once owned by the federal government and was sold to a private party under a reservation of mineral rights to the federal government. In this case, all subsequent owners of the property will own rights to the surface only (this is far more common west of the Mississippi river than east of it). If your deed states that you own the land in "fee simple," then you own the mineral rights, although they may be subject to a lease.
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Sale of Mineral Rights
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Although it is possible to sell the rights to the minerals beneath your property and retain rights to the surface and buildings, the sale of mineral rights carries with it the right to enter the surface and extract these minerals (drilling an oil well, for example). The specifics of how much the mineral rights owner may disturb the owner of the surface rights should be negotiated in a mineral rights purchase agreement. If you are considering buying property subject to a reservation of mineral rights, you will be bound by the terms of this contract and you should carefully check its terms.
Lease of Mineral Rights
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It is possible to lease the rights to minerals underneath a property. In this case the surface owner will still be considered the owner of these rights, although the lessee of the mineral rights will have the sole right to extract the minerals for the duration of the lease (sometimes exceeding 50 years). Subsequent owners of the property will also be subject to the terms of the lease, thereby reducing the market value of the property. Extraction companies often initially prefer leases because exploration is usually necessary to determine the total value of the available minerals.
Royalties
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In most mineral rights leases the owner reserves the right to either a fee per ton of minerals extracted, or a percentage of the production value (known as "royalties"). Some states require that the owner of the property be paid a minimum royalty--12.5 percent of the production value is a typical minimum, although more may be negotiated.
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