Environmental and Energy Law Blog

Monday, February 26, 2018

In Focus: Mineral Rights and Property Rights

Advances in horizontal drilling, hydraulic fracturing and other oil and gas extraction techniques have contributed to an energy boom in Texas. At the same time, questions over mineral rights and property rights have become hot button issues. When landowners and mineral rights owners are involved in disputes, it is essential to have the advice of an experienced energy contracts attorney.

A Primer on Mineral Rights 

Generally, mineral rights are obtained when energy and mining companies enter into long-term leases with property owners to exploit reserves under their land. 
In particular, holders of mineral rights have the right to explore, develop, extract and market any resources under the surface of the leased land. These resources include oil and natural gas, coal, precious and non-precious metals, or rare earth elements and minerals.Although property owners receive compensation, they are not paid for the actual energy or mineral reserves beneath their land. 
It is worth noting that mineral rights are similar to property rights that can be bought sold and transferred. Traditionally, mineral rights have been transferred by private property owners in fee simple deeds that are comprised of both mineral rights and surface rights. 

What are surface rights?

Holders of surface rights have the right to improve, sell or transfer the surface of the applicable parcel of land. In the case of agricultural land, for example, owners of surface rights can plow or graze the land as needed. Property owners can also improve their land to support those operations by digging a foundation for buildings, installing underground storage tanks or making other improvements.
Surface owners who don’t own the corresponding mineral rights to the surface parcels cannot exploit resources underneath their land, however. In some cases, an energy company or a trust may own the mineral rights to the land under numerous surface parcels. 

Mineral Rights Transfers

The transfer of mineral rights is becoming increasingly common. Energy and mining companies frequently convince landowners to sell or lease their mineral rights for cash payments, ongoing royalties or both. Nonetheless, property owners retain their surface rights and can continue to use and improve the land as they see fit. 

Disputes Between Landowners and Mineral Rights Owners

Today, disputes between property owners and mineral rights owners are not common. In some cases, property owners who sell their mineral rights are required to surrender a portion of the land so that an energy or mineral company can set up an extraction zone. This will also require making improvements, such as drilling rigs, outdoor storage areas, roads or tracks, fences, etc.

When such activity creates noise, light, air and water pollution or other environmental and safety hazards, disputes are likely. With the proliferation of horizontal drilling, however, disputes can also arise between owners of mineral rights. In the end, whether you are a landowner or a mineral rights owner, having proper legal representation is crucial.


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