Pulse: Majority Polarized Over Two Separate Deeds for Land Transactions

The July LANDTHINK Pulse revealed that 39% of respondents STRONGLY AGREE that every land transaction be required to have two deeds – one for surface rights and one for mineral rights. While 37% of respondents STRONGLY DISAGREE. There are two major categories of land rights: surface rights and mineral rights. Surface rights refer to the ability to control the surface of the land. A person who owns surface rights to a tract of land may build on it, plant and sell crops and timber, use the surface water, lease the land, or sell it. Mineral rights are sub-surface rights. It differs in individual states, but natural gas, oil, and coal are the most common minerals. Gold, silver, lithium and other minerals are sometimes included but are less common. If you own minerals, you have the right to explore and develop those minerals or sell or lease them out to companies or individuals.

Last month, the July Pulse asked: Should every land transaction be required to have two deeds – one for surface rights and one for mineral rights?

In recent years, mineral rights have become a focal point for landowners across the country and it presents a unique pathway for investors seeking to diversify their portfolios and capitalize on the growing global demand for natural resources. Mineral rights are a valuable asset for landowners due to their potential for passive income and diversification of investments, especially in areas with valuable resources like oil, gas, or minerals. States such as Texas, New Mexico, North Dakota, Oklahoma, Louisiana and Pennsylvania have emerged as leaders, not only in energy production but also in the complex market of mineral rights transactions.

In the U.S., individuals and private companies can own mineral rights. This contrasts with many other countries where mineral rights are owned by the government. Understanding how to properly convey mineral rights has become more crucial than ever before for those who own, or plan to own, land in the United States. This process requires careful attention to legal details to avoid disputes and potential financial loss.

Mineral rights are automatically considered part of the land in a property conveyance unless or until an owner or seller separates the ownership. An owner can separate the mineral rights from the land by conveying the land but retaining the mineral rights, conveying the mineral rights but retaining the land, or conveying the land to one person and the mineral rights to a different person.

A seller can only convey property they own, so each sale of the land after the minerals have been separated will only include the land. Land deeds made after the initial separation of the minerals will not include the fact that mineral rights are not included. This is why it can be tough to find out who owns the mineral rights to your property; the information isn’t on the deed.

The legal mechanism by which mineral rights are separated from surface land ownership is referred to as the “process of severance”. Three mineral estate scenarios exist:

A unified estate: one party owns both surface and mineral rights.
A severed or split estate: different parties own the surface and mineral rights. The rights are separate from each other, having been ‘severed’ at some time in the past.
A fractional estate: mineral rights are split between several owners, often through inheritance.

How do you know who owns the mineral rights on property you own or property you’re thinking about buying? The only way to determine if a deed conveys mineral rights is to review the property’s chain of title. A chain of title is simply a sequential record of documents showing how the mineral rights have changed hands through the years. The chain of title ensures that the mineral rights were not previously severed and are included in the surface estate. If the mineral rights have been severed from the property –by reservation in a deed or transfer to a third party or heir– a title search may trace the mineral title as far as possible. The process can be overwhelming. Keep in mind that there are professionals who specialize in this such as landmen, title companies and attorneys.

Researching mineral rights isn’t always straightforward, but here’s where to begin:

• County Records Office: The go-to for deeds and historical ownership records
• Tax Assessor’s Office: They’ll have details on your property’s legal description
• Royalty Deeds: Check for documents that might grant someone rights to royalties from mineral production
• Online Records Services: These tools make it easier to access digitized county records
• GIS Viewers: Many state agencies provide mapping tools that help pinpoint mineral rights by legal descriptions

Things to Consider Regarding Mineral Rights When Buying Land

1. Do Your Research. It’s important to know who owns the mineral rights. If it’s you, you could earn extra income by leasing or selling them. If someone else owns them, that person may have the power to drill or dig under your property without your consent. Mineral rights have the possibility to be extremely lucrative, so understanding these rights helps you protect your land and maximize its value.
2. Third Party Ownership Can Affect Surface Use. States that offer split land ownership make it clear that mineral rights are more powerful than surface rights, which means the owner of a mineral servitude will be able to access and use the surface to extract the minerals from underneath. A third party may be granted a license to extract and remove the reserves. A third party may also be given an easement to extract the minerals.
3. Should You Buy Land Without Mineral Rights? In states like Texas, it’s extremely common to not own the mineral rights. Over 90% of the time in areas rich in oil and gas, the mineral rights were severed from the surface rights long ago. This means that even if you don’t own the minerals beneath the land, buying the surface is still a perfectly normal and acceptable transaction. For most buyers, owning the surface is all they need especially if their main interest is in using the land for farming, building, or recreational purposes. Even without the mineral rights, you still have full ownership of the surface and control over how you use it. The lack of mineral rights typically doesn’t affect everyday use for most buyers.

Land transactions are very complicated and knowing whether or not mineral rights are combined with surface rights isn’t always straightforward. If you’re planning to buy or sell land, recently inherited mineral rights, or are looking to enter into a lease with an oil and gas company, you should contact an attorney to help you understand the process and avoid common pitfalls relating to subsurface minerals. Given the significant potential value mineral rights have in certain areas of the country, finding out what is included in the deal is very important.

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