- The traditional form of real estate ownership in the United States and most common law nations such as the United Kingdom is the fee simple estate. The holder of a fee simple estate holds both surface and subsurface mineral rights and is entitled to sell or lease these rights to another party either in whole or in part. If you hold your property in fee simple, there should be a notation on the title deed to that effect. Although the outright sale of mineral rights will break up a fee simple estate, leasing these rights will not.
- In most cases, mineral extraction companies initially prefer to lease these rights rather than buy them, because they will need to conduct extensive exploration to determine the approximate value of the minerals. If exploration reveals rich mineral deposits, a purchase may be considered when the lease expires. .
- A few states have laws that require that a minimum royalty (usually about 12.5%) be given to an estate owner when mineral rights are leased. In most cases, however, royalties will have to be negotiated. In some cases, estate owners are able to negotiate royalty payments as high as 25% of the value of the resources extracted. In other cases, royalties are based in a certain amount per ton extracted, regardless of the price of the resources.
- The most important matter to consider in mineral rights leasing negotiations (other than the amount of the royalty) is the extent to which the extraction company is entitled to enter your land and disturb your use of the surface in order to extract the minerals. If you negotiate poorly, the extraction company may be left with such extensive rights to disturb your property that the surface rights become virtually worthless.
- Oil and natural gas have the ability to move through underground rock and sand, and they do not stop at property boundaries. This process, called unitization, allows an extraction company to extract minerals from two parcels of land by entering only one of them, without paying royalties to the owner of the neighboring land. Keep this in mind if an extraction company approaches your neighbor about a mineral rights lease, because some states lack effective legislation to deal with this problem.
