Pitfalls of Selling Mineral Rights

Large-scale mine operation

Mineral rights are often more valuable than the associated surface property, enticing owners to segregate mineral rights from surface rights and sell. Under this scenario, property owners usually assume profits from unseen minerals below ground and think they can maintain the surface for living, agriculture or other purposes. However, damages to the surface occur as minerals are extracted, and paying for unexpected problems can negate any profits reaped from the sale of mineral rights. It is highly recommended you consult an attorney before signing a mineral rights agreement, but if you choose to negotiate on your own behalf, consider some of the pitfalls that can occur.

Background

Minerals are metal ore, coal, oil and natural gas, gems, dimension and crushed stone, salt and other materials extracted from the ground. Oil and gas rights are usually leased from the owner; metal ore rights are generally sold.

Time Frame

Mineral rights always grant rights to access minerals. Timing of operations is particularly important. Mining companies rely on heavy equipment and manpower, scheduling projects years ahead which may conflict with plans surface owners have for the property. Specify in the agreement exactly when minerals will be extracted, including the duration of the project.

Considerations

Mining operations use specialized extraction methods. It is very important to specify in the agreement the type of extraction method that will be employed on the property. This information is necessary to develop reclamation details and liability responsibilities also to be included in mineral rights sale agreements.

Warnings

Damage to trees resulting from settlement

Damages from extraction may not be apparent for decades after mining has been completed, at which time mineral rights holders may be defunct, bankrupt or dead. Damages can result from subsidence and settlement affecting surface buildings or aquifers. Cracks in foundations may appear many years after mining companies complete extraction. In regards to aquifers, subsidence can drain the aquifer, reducing water levels in wells on rural properties which in turn decreases the overall property value. The mineral rights sales agreement should contain specific language and monetary compensation to address these issues.

Expert Insight

Each mineral rights sale agreement is unique. While there are federal, state and local laws that offer some level of environmental and health safety, protections are not guaranteed unless explicitly stated in agreements. Adequate language in the agreement to protect crops, livestock, buildings, personal property or other site-specific entities is necessary to safeguard the seller. A qualified attorney should draw up a mineral sales agreement.

References

• Geology.com: Mineral Rights
• New Mexico Energy Minerals and Natural Resources Department: Minerals Rights, Claims and Geology