What are Mineral Rights?
To encourage settlement in the western part of the United States, the government started including the mineral rights to the land while selling it to the civilians. In the past, the government or ruling authority kept these rights; however, today, mineral rights exist in every state of the country. When a person becomes the owner of a piece of land, if the mineral rights are attached to it, he will be the owner of everything under the ground as well i.e. minerals. In this definition, minerals are not only the valuable rocks found under the ground but also include oil and gas. The surface rights to land are the authority to use the surface of the land and everything found on it i.e. water, sand, limestone, etc.
In any case, the dominant party is always the one that holds the mineral rights to a piece of land because, even if it does not own surface rights, it is still allowed access to a reasonable portion of the surface of the land to reach the minerals underneath for extraction and the surface rights owner can not object to this
The mineral and surface rights to a piece of land can be found in 3 states;
Unified Estate: This is sometimes referred to as fee simple or unified tenure and it means that the mineral and surface rights of the land have not been separated
Split Estate: Also called the severed estate, it refers to the situation where the mineral and surface rights have been separated, either by the owner retaining surface rights and selling mineral rights or vice versa. The retained rights may be further leased or sold to another party.
Fractional Ownership: The mineral property has been apportioned between several different parties, this often happens as a result of the inheritance of mineral rights to several heirs.
When you consider purchasing a piece of land, having the mineral rights to the property is a huge plus since, as discussed above, the party with the mineral rights has the right to exploit them even if it is at your expense. Owning the mineral property means that at any time in the future, no one will be able to damage your property unless you wish to lease it for oil royalties.
Oil Royalties are the payments made to the owner of the mineral property as a percentage of the oil and gas sold which was extracted from his property. Essentially, it works similar to renting your land to a company and the return is a percentage of the sales. If the company needs to set up a rig or mine for extraction, you can also lease the surface rights to the company and get a fixed return as compensation for using your land. After all the extraction is complete, the company will return the surface to a decent condition before leaving. The advantage of leasing is that the demand for oil and gas is an ever-growing market and the returns are a hefty percentage, up to 25%. Furthermore, any volatility in the market which leads to a rise in prices will increase your return.
The oil and gas royalty market works similarly to a stock exchange in that you can buy and sell leases of mineral rights and gain a return from the market growth or instability. To partake in this trade, you have to contact a brokerage that will either purchase the rights from you for extraction companies that are looking for mineral rights for sale from PheasantEnergy or lease them further to such companies on your behalf.
If you’re purchasing property in a residential area or a communal area, almost all of these have laws against extraction setups. This means that if extraction companies suspect reserves of minerals underneath the land, they have to mine horizontally, in essence, digging a tunnel underground to reach the minerals. For this reason, the surface of your land will not be at risk and it doesn’t matter who owns the mineral rights since you will likely never have to come in contact with them.
If you’re on a budget, land that does not come with the mineral rights will be cheaper obviously. Pair that with a community area and you’re in the ideal spot to purchase land as a severed estate. Another reason to go for just surface rights is if the minerals have already been extracted in the past and it is common knowledge that the land underneath is barren since it is not worth the extra money, nor would any further extraction need to take place there. Lastly, tracking down the party (or even parties in the case of fractional ownership) that owns mineral rights is a complicated process and you may need to hire a professional lawyer who will track down the history of the property because sometimes, although it may be stated that the property is a unified estate; that may not be the case.
If your area has not historically been seen as a mineral-rich area with extractions being common practice, it would probably be a useless exercise to track down the owner and try to purchase them back, you might even end up overpaying.