Historically, most homeowners and landowners have not been overly concerned with mineral rights. Most residential areas are far from mining deposits, and most useful mining areas have already been bought up and exploited by mining companies. Additionally, most mining was carried out on government-owned land, with the government handing out patented and leased claims. However, this has changed in recent years, with advances in how geologists search for minerals (including oil and gas), as well as extraction of such valuable minerals, bringing even small landowners into the mineral market. With many small landowners now being asked if they are willing to permit drilling companies to exploit the resources under their land, it is important all landowners understand their rights and how to protect them.
What do you own in terms of mineral rights?
Per the case of Del Monte Mining & Milling Co. v. Last Chance Mining & Milling Co, any landowner who owns the “fee” of the land (i.e. has title to the surface) also owns title to the soil beneath the surface as far down as he or she can exploit it. This means that any landowner whose title does not explicitly state that they do not own the rights will own the rights, and that no one can extract those resources without the landowner’s permission. However, mineral rights are severable from the surface estate. This means that a landowner may sell his or her mineral rights while retaining surface rights. An example of this would be a farmer who continues to use his land to grow crops while permitting an oil company to extract the oil from underneath the farm.
What do oil & gas companies get when they buy the mineral rights?
What oil and gas companies get depends on the terms they provide in the contract they offer the landowner. In general, the mining company will be interested only in “leasing” the mineral rights, i.e. obtaining a right to extract the minerals in exchange for a fee paid to the landowner. However, they may buy them outright if the volume of oil or gas extracted is expected to be vast, taking many years to achieve. This also generally includes the right to install whatever facilities are required for extraction, for example an oil derrick or mining shaft. However, this does not extend to any nuisances created by the mining company. For example, the oil and gas company cannot dump its waste on the landowner’s property unless the landowner consents, nor can the mining company build permanent structures without contractual permission.
How do landowners protect their mineral rights?
The primary means of protecting one’s mineral rights is to engage an attorney specializing in the field and ensure they assist with the negotiations. Most oil and gas attorneys work on commission, prompting them to get the highest prices possible from mining companies, while ensuring the concerns of their client are met to avoid souring the deal. Mining companies will always seek to obtain the lowest price and the most rights they legally can, so having adequate legal protection should always be a priority for the landowner.
If you decide to lease your mineral rights, it’s wise to keep track of your contract and royalties using some type of mineral management software, like that offered by InGauge. This app gives owners better visibility over well production and helps ensure full payment is received for extraction performed on their property. Software like this is critical for those with multiple drill sites and royalty streams to manage.