If you were to open your mailbox and find a letter from a mining company that wanted to purchase mineral rights on your property, what would your reaction be? While it may seem great to take the money offered from the first company, that might not always be the best option. In fact, you might be selling yourself short if you do.
Mineral rights are generally sold separately from the land that they are on. This means that you have to have the title to the mineral rights for your property, and if it was purchased from another person, the mineral rights might have already been signed away. In these cases, they are no longer yours to sell. But that doesn’t mean it isn’t worth looking into your prospects to determine if financial freedom is in your future.
The Types of Mineral Rights
While most homeowners will see their property rights as extending from the surface of the earth to the sky above and the core deep below, they typically don’t have much use for the minerals found under the ground. Although, these are precious resources to mining companies and the oil and gas industry. Today, it has become common to provide ownership rights to any minerals found on the property.
The most common types of mineral rights that can be distributed on a parcel of land include:
When surface mineral rights are given, the owner of a parcel signs away the minerals that can be found on the surface of the land only. That means that anything subsurface is not included in the agreement.
Depending on the mineral portfolio present, owners of subsurface rights may receive shut-in, royalty, or lease payments through mineral interests. Shut-in payments are considered royalties that an oil and gas company pays to a lessor to maintain an active lease on mineral assets that are currently unproductive.
Any owner of oil and gas royalty rights is considered an investor. Under these rights, a stream of royalty payments will continue to be paid out on a mineral rights investment. Naturally, the owner will receive a share of the income as the minerals being produced are coming from their leased property.
Oil and Gas Rights
Since oil and natural gas are typically fluids, they can easily flow through joints and faults into neighboring properties. Fluids that flow between properties may be extracted from any property where fugitive resources are located through the “rule of capture.” That means you could provide mineral rights even if the oil is drawn from a joined tract of land that you don’t own.
Any mineral rights property holder can sell, lease, or bequeath them as gifts. That means that the wealth can be either sold to the highest bidder or passed down through the generations to establish long-term family wealth. This is true even if the property is sold and the mineral rights are retained for the tract of land.