How to Get Mineral Rights on a Property
Mineral rights are property rights associated with metallic ore, oil, natural gas, coal and other raw materials. Mineral rights can be bought, sold or leased as separate property from the overlying surface land. To buy the mineral rights on a property, it must be determined whether minerals are present and whether they have been severed from the surface estate. Other factors influence the value of mineral rights, but once the transaction is finalized, the purchaser holds a mineral deed granting rights of access and production.
Other People Are Reading
Instructions
-
-
1
Consult geological maps to determine whether and where minerals occur below the surface. If valuable minerals, such as oil, gas or coal, underlie a property, it is paramount to determine whether associated rights have been severed from the surface rights. A title search with wording such as "surface only of the..." or with references to "mineral exceptions" or "mineral deeds" indicates rights have been separated from the surface property.
-
2
Identify mineral rights holders. This is a difficult task that requires title searches going back to the 1860s. During the middle of the 19th century, mineral rights were severed from property rights at an accelerated pace when railroad companies sold extra land granted by the federal government but kept mineral rights for future use. Adding to the complexity has been accelerated real estate development, often into agricultural and rural areas, over the same period, creating myriad land transactions that must be searched.
-
-
3
Estimate the value of the mineral rights to negotiate a suitable price. Mineral rights have been assessed at $5 to $25,000 per acre depending upon many factors. Minerals that lie closer to the surface are easier to produce and worth more than those that require deep drilling and expensive injection of fluids that force hydrocarbons to the surface. Producing mineral rights is more valuable because volumes of minerals have been determined; volumes directly correlate to royalty payments. Larger tracts are easier to develop, representing fewer holders with which oil and gas companies have to execute transactions.
Most important, keep track of the current market price of the minerals. Higher market prices increase mineral rights values.
-
4
Make an offer. Negotiations may take some time, but being armed with valuation information will increase your ability to negotiate a fair price. Additional knowledge about decreasing rates of production and more expensive extraction processes, can entice property holders to sever mineral rights and sell. Mineral rights will be transferred through a deed title that grants rights to access and production.
-
1
Tips & Warnings
Landmen are trained professionals who can search and value mineral rights. It may be worth the expense of hiring outside consultants to perform this work when purchasing mineral rights.
Production volumes may be unknown or at decreasing rates, which create uncertainty in the value of mineral rights. It is important to assess this uncertainty as a risk when negotiating purchase prices.
References
- Photo Credit Mineral Cut as a Background image by Lucy Cherniak from Fotolia.com
