Excelling in the Oil and Gas Industry for decades.

Considering that the mineral rights can be worth much more than the land they are on, this is a question worth finding an answer to. Many property buyers assume they are gaining ownership of the entire property, both surface and subsurface rights. This assumption is wrong. Generally, a property conveyance transfers rights to both the surface land and mineral reserves below, until the mineral rights are sold. In this case, the mineral rights transfer with the property to you. If you or a previous landowner have not sold the mineral interests, you can sell your mineral rights to the big mining company or a trusted mineral rights broker.

Mineral rights agreements entered into by the previous landowners that have not expired are still valid, and you will be obligated under law to honor them. If you neglected to conduct a thorough land and mineral rights search before buying the property, a young inheritor could show up on your doorstep demanding the right to drill oil and gas wells bestowed to his great-great-grandfather and passed down through the generations.

More likely, a large oil company could come calling. They tend to buy up many mineral rights on adjacent lands as future investments. The oil company may be actively drilling on your neighbor’s property. If they have also bought the mineral rights on your property, you could also receive a letter demanding access to explore and drill on your land.

So a property owner can sell the land and the mineral rights, or keep the land and sell the mineral rights. Moreover, the landowner can sell rights to only the oil and gas, limestone, or coal on a tract of land. These rights can be further allocated to specific wells or coal seams, or by separating coal and coal methane; or by surface depth or geographic area, and so forth.

In the case of oil and gas, a lease agreement is entered into between the lessor (mineral rights owner, who may or may not also own the land) and lessee.

The mineral rights give the owner permission to use the surface of the land to access the minerals for exploration and production. Though penalties could be levied and the mineral rights can even be withdrawn if the miner contravenes the surface damage agreement stipulating what types of activities are permissible.

The holders of mineral rights on a property can also lease, sell, and bequeath them as gifts. This way they will pass them down from generation to generation independent of changes in ownership of the attached property.

Also, you have to know that mineral rights and oil and gas royalties come with taxes. You can check our guide on what are mineral rights taxes and how to report oil and gas royalties on tax return.

Every mineral rights broker can also help you sell mineral rights. When choosing a mineral rights sales specialist, ask these questions:

• Do they have expertise in the minerals you are selling? As this guide has demonstrated, very different ownership structures (leases) and rules govern oil and gas rights than say copper or titanium deposits.
• What value of deposits do they typically handle? The Coles, for example, will require an agent with experience brokering deals with major mining and energy companies, and expertise in uranium mining. If selling potential gas reserves for exploration, an agent familiar with the current drilling technologies such as tracking is required to assess the value of the reserves accurately.
• How much have their recent transactions sold for? If they are selling mining rights at $5,000 an acre when the average selling price is $6,000, enquire as to why.
• What type of royalty, leasing, and shut-in terms are they negotiating? Like any brokered deal, the risk exists that a broker will accept kickbacks from one party in exchange for negotiating more attractive fees. Ensuring fees are market competitive is the best way to avoid exploitation.

Mineral rights consultants typically have generations of firsthand experience buying and selling mineral rights, and deep contacts in the ‘old boys’ network.

Pheasant Energy, for instance, has grown out of the first purchase of oil and gas rights by the Moore family in the 1930s. Today, we are involved in upstream oil and gas markets, mineral rights management – including leasing, sales, and investor participation with their own interests – and several trusts and tax-efficient investment vehicles. Such in-depth knowledge across states, basins, and mineral assets can help both buyers and sellers make more astute strategic and speculative investments.