Whether you are interested in selling or have been approached by a potential buyer for your land regarding your mineral rights, it’s essential to understand exactly what is taking place in the transaction. When in ownership of land, you may either possess surface rights or mineral rights, both of which have different implications. In this article, Adam Ferrari explains the differences between the two.
What Are Surface Rights?
When buying property, it’s obvious that everything above ground is included, whether it be houses, gardens, storage sheds, etc. However, that doesn’t mean that you own the ground beneath it. When it comes to drilling for oil and gas deep beneath the surface, there is usually a different owner.
If you own the surface rights to a piece of land, you possess the right to dig a basement, till your land, plant trees, etc. But that doesn’t mean that you are legally allowed to go deeper to extract mineral deposits from the earth. Therefore, owners of surface rights cannot lease or sell their surface-owned land to oil and gas companies for exploration or extraction purposes. Instead, that deal will have to be negotiated with mineral rights owners.
What Are Mineral Rights?
Below the surface of a property, a space called the “mineral zone” takes effect and is owned by those with the mineral rights to that land. In the United States, individuals with mineral rights ownership can legally explore, extract, and sell deposits such as natural gas found beneath the surface of a given region.
Much like surface rights and selling a home, mineral rights can be bought, leased, and sold. Payments can be constructed based on a flat rate or through a royalty system, depending on how much value can be extracted from the property.
Most commonly, large institutional investors seek to buy mineral rights if oil prices are high enough to justify unconventional oil investments. Mineral rights are almost exclusively offered in the United States, as most countries do not distinguish between surface and mineral rights—only offering property as deep as the surface.
Who Has the Power?
Believe it or not, if a person who owns the mineral rights to the land directly beneath your home wants to place oil extraction equipment in your very own backyard, they are legally entitled to do so. Because mineral rights owners typically have a stake in the surface rights to set up space for drilling rigs, outdoor storage areas, containment pods, roads, fences, water treatment facilities, and more, they can build on your surface-owned property within their surface rights zone.
If you’re unsure as to whether or not you hold the surface or mineral rights to your property, you should check your mortgage for information. Additionally, you may be contacted about owning mineral rights without even knowing you had them. It’s important to stay informed on these matters to determine the total value of your land. The team at Ferrari Energy has extensive expertise in this subject matter and it ready and able to help you understand your options today.
About Adam Ferrari
Adam Ferrari is the founder of the mineral acquisitions company Ferrari Energy. He is a chemical engineer by degree and is an accomplished petroleum engineer by profession. He also has experience in the financial sector through his work at an investment banking firm. Under his leadership, his company has supported numerous charitable organizations including St. Jude Children’s Hospital, Freedom Service Dogs, Denver Rescue Mission, Coats for Colorado, and Next Steps of Chicago.