Mineral Rights in Oil & Gas

Oil Production Facility

Mineral rights pertain to oil and gas deposits beneath the earth's surface. Oil and gas mineral rights are generally the property of the surface owner. When mineral resources lie beneath public lands, the rights to exploit the minerals are held by the government. Sometimes, for privately held rights, and especially in the Western United States, mineral rights are separated from the surface property rights. Special treatment occurs for these types of mineral rights.

Rights Verses Leases

Natural Gas

Mineral rights are different from mineral leases in that if you own the mineral rights you have all rights to the oil and gas deposits in perpetuity, and you may access the deposits in any way you see fit. In contrast, mineral leases are bought for a specified time period, and the lease-holder's access is granted but governed under the common-law doctrine of "reasonable surface use," meaning that you can develop the oil and gas below the surface but cannot cause excessive damage to the property in the process.

Sample Lease Agreement

Gas Wells

Each state has different regulations governing mineral rights and leases. It is important to check with an attorney in the state where you are seeking mineral rights. However, every lease agreement should state that no other party has permission to develop the oil and gas deposits. The agreement should lay out the terms of royalty payments to be paid to the lessor (the party granting the lease), and specify restrictions on environmental damage.

Mineral Rights Verses Real Estate Property

Railroad Tracks

Early in the 20th century, there was great incentive to develop the western United States: the federal government was giving land to railroads and adventurous settlers. After the initial land rush, the railroads sold unwanted parcels to other settlers---but retained the mineral rights to be developed in the future. Mineral rights were, in effect, separated from surface "estate rights," creating the present mess for large-scale oil and gas projects as most deposits lie under several land parcels.

Reservation in Deeds

Ranch Land

In other regions of the United States, private landowners decided to sever the mineral rights from their surface property rights in order to profit from the oil and gas deposits. The sale of the mineral rights is executed with a deed called a "reservation in deeds." Generally, this reservation occurs when the property owner cannot exploit valuable oil and gas deposits because of the considerable costs associated with development. The property owner makes money off the sale of the deed, but is not entitled to royalties. The "reservation in deeds" states that the surface property owner can still use the surface land for other purposes but cannot interfere with the oil and gas development.

Attorney's Title of Opinion

Oil Derrick

Over time, the separation of oil and gas rights from surface rights has led to unreliable record-keeping. Many of these mineral title deeds simply do not exist, making it difficult to discern the rightful owner of the minerals. When no title can be found, an attorney's "title of opinion" serves as the title deed in the sale of mineral rights. The title of opinion is a document an attorney prepares after researching historic public records and abstracts of titles, supporting and stating the proper ownership. However, a lot of litigation has transpired trying to untangle mineral property rights, especially where oil and gas deposits are widely distributed, plentiful and easily developed.

References

• Mineral and Mining Law
• Mineral Rights

Resources

• ENVIROWORDS