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What are oil and mineral rights?

On Behalf of | Mar 5, 2024 | Oil & Gas Law

When you own a piece of land, you may own more than meets the eye – because you probably have the mineral rights to the property, too.

Mineral rights are the ownership interest someone has in the resources under the ground, whether that includes gold, silver, coal, gas or oil. If you own the mineral rights under your property whatever is there is yours – but development is often expensive and difficult. 

How can you profit from your mineral rights?

You can sell your mineral rights – and people sometimes do – without selling the surface rights of their property. This is called “severing” the estate, as opposed to a “unified” estate where the surface and mineral rights are kept together. 

Most of the time, however, property owners are asked if they’re willing to lease their mineral rights for development in exchange for compensation from the oil and gas company. If you choose to go this route, you need to take certain precautions to protect your interests. This means understanding exactly how you will get paid. 

Typically, a mineral lease includes both royalties and bonuses. The bonus is a one-time payment that the oil and gas developer will pay you once you agree to a lease – and it can be substantial. Royalties, on the other hand, are paid only when (and if) the company drills a well and is successful. Your royalties will typically be a fraction of the value of what is produced, but they may be intermittent – or nonexistent if the well isn’t productive. 

Understanding more about your options when you think there is a literal or figurative gold mine under your feet can help you make informed decisions – and get the best value for your property rights.