Mineral rights

Mineral rights are property rights that confer to the holder the right exploit an area for the minerals it harbours. Mineral rights are severable from property ownership.

Mineral estate

Ownership of mineral rights (more properly "mineral interest") is an estate in real property. Technically it is known as a mineral estate, although often referred to as mineral rights. It is the right of the owner to exploit, mine, and/or produce any or all of the minerals lying below the surface of the property.

The mineral estate of the land includes all organic and inorganic substances that form a part of the soil. An exception would be sand, gravel, limestone, subsurface water, etc. which are normally considered part of the surface estate.

Severability

Mineral estates are often severed from the surface estate. Such severance is accomplished with a conveyance or reservation of these rights. This conveyance or reservation includes minerals or substances considered to be minerals. Mineral rights do include hydrocarbon resources such as oil and natural gas, which are technically not minerals, because a mineral is formally a naturally occurring crystalline "solid". But nonetheless, legal regimes typically lump them together under this one term. Such a conveyance or reservation includes royalties, bonuses and rentals.

Major elements

The five elements of a mineral right are:

1. the right to use as much of the surface as is reasonably necessary to access the minerals,
2. the right to further convey rights,
3. the right to receive bonus consideration,
4. the right to receive delay rentals and
5. the right to receive royalties.

The owner of a mineral interest may separately convey any or all of the above-listed interests. Minerals may be possessed as a life estate, which does not permit a person to sell them, but merely that they own the minerals so long as they live. After this, the rights revert to a predesignated entity, such as a specific organization or person.

It is possible for mineral right owners to sever and sell oil and gas royalties, while keeping the other mineral rights. In such case, if the oil lease expires, the royalty owner has nothing and the mineral owner still owns the minerals.

Freehold and non-freehold ownership

The status of the land is fixed by law, and is distinguished as being either a freehold estate or a non-freehold estate. Freehold means ownership in perpetuity. Non-freehold implies that the owner holds the rights for a specific time period, after which the holder no longer holds the rights.

Mineral Rights Leasing

The four major stages for mineral rights leasing are:

1. Ownership
2. Leasing
3. The Division Order
4. The Royalty Check

Ownership

When it comes to property rights, the United States is special. As an individual, Americans are guaranteed the right to own the minerals beneath the land. No other country allows its citizens to own the minerals beneath the land.

A legally binding mineral title opinion is typically the only document that substantiates mineral ownership. Back in the 17- and 1800's, when land was originally deeded to individuals, the mineral estate naturally came with the land, and as long as it hasn't been severed (meaning the land and minerals remain together), stays with the land.

There are three distinct but related aspects of ownership. They are:

• Legal Description
• Net mineral acres
• Ownership Type

Leasing

To bring oil and gas reserves to market, minerals are leased by oil companies through a legally binding contract known as a lease. This arrangement between individual mineral owners and oil companies began prior to 1900 and still thrives today. Before exploration can begin, the mineral owner (lessor) and the oil company (lessee) must agree to certain terms regarding the rights, privileges and obligations of the respective parties during the exploration and possible production stages.

Although there are numerous other important details, the basic structure of the lease is straightforward: in exchange for an up-front lease bonus payment, plus a royalty percentage of the value of any production, the mineral owner grants the oil company the right to drill for a period of time, known as the primary term. If the term of the oil or gas lease extends beyond the primary term, and a well was not drilled, then the Lessee is required to pay the lessor a delay rental. This delay rental could be $1 or more per acre. In some cases, no drilling occurs and the lease simply expires.

The duration of the lease may be extended when drilling or production starts. This enters into the period of time known as the secondary term, which applies for as long as oil and gas is produced in paying quantities.

See also

• Bergregal - mining rights in Europe
• General Mining Act of 1872
• Stock-Raising Homestead Act of 1916
• Air rights
• Easement
• Land rights
• Oil and gas law in the United States
• Split estate
• Water rights

External links

• How to File a US Federal Mining Claim
• 'War Brewing' over Mining Rights in Rural BC, TheTyee.ca, June 14, 2006
• "Video Tutorials for Mineral Rights Owners"
• Surface Rights vs. Mineral Rights
• What Is A Mining Claim, Legally?