Mineral rights


Mineral rights are property rights to exploit an area for the minerals it harbors. Mineral rights can be separate from property ownership. Mineral rights can refer to sedentary minerals that do not move below the Earth's surface or fluid minerals such as oil or natural gas. There are three major types of mineral property: unified estate, severed or split estate, and fractional ownership of minerals.

Mineral estate

Owning mineral rights gives the owner the right to exploit, mine, or produce any or all minerals they own. Minerals can refer to oil, gas, coal, metal ores, stones, sands, or salts. An owner of mineral rights may sell, lease, or donate those minerals to any person or company as they see fit. Mineral interests can be owned by private landowners, private companies, or federal, state or local governments. Sorting these rights are a large part of mineral exploration. A brief outline of rights and responsibilities of parties involved can be found here.

Types of mineral estate

Unified estate

Unified estates, sometimes referred to as "fee simple" or "unified tenure" mean that the surface and mineral rights are not severed.

Severed/split estate

This type of estate occurs when mineral and surface ownership are separated. This can occur from prior ownership of mineral rights or is commonly performed when land is passed between family generations. Today corporations own a significant portion of mineral rights beneath private individuals.
Mineral estates can be severed, or separated, from surface estates. There are two main avenues to mineral rights severance: the surface property may be sold and the minerals retained, or the minerals may be sold and the surface property retained, though the former is more common. When mineral rights have been severed from the surface rights, it is referred to as a "split estate." In a split estate, the owner of the mineral rights has the right to develop those minerals, regardless of who owns the surface rights. This is because in United States law, mineral rights trump surface rights. The U.S. historical precedent for this severance roots from western expansion and The Land Ordinance Act of 1785 and The Northwest Ordinance Act of 1789 at the cost of dispossessed Natives. Severability was further reinforced by the Homestead Act of 1862 and the 1862 Railroad Act. Agricultural patents and the California gold rush of 1848 began placing lands that were mineral abundant into private hands and furthered the precedent of mineral rights outweighing surface rights. This was a crucial step in the development of an economic system based largely on private incentives and market transactions. An early case involving a property dispute between a father and son involving ownership of coal veins in Pennsylvania is cited stating; “One who has the exclusive right to mine coal upon a tract of land has the right of possession even as against the owner of the soil, so far as it is necessary to carry on mining operations.”. A later case in Texas in 1862 set precedent by stating “it is a well-established doctrine from the earliest days of the common law, that the right to the minerals thus reserved carries with it the right to enter, dig and carry them away.". Some may argue that the U.S. justice system's enabling of this precedent is further exacerbated by industry lobbying that enables the status quo of favoring oil and gas development vs other innovations.
This severability can create tension between mineral rights owners and surface rights owners if the surface rights owners do not want to allow the mineral rights owners to use their property to access their minerals. This is becoming ever more present in the light of recent unconventional oil and gas development made feasible by technological advancement such as hydraulic fracturing. Problems include water pollution, fluid storage issues and surface damages. These are especially common in the West Virginia gas wells of the Marcellus Shale. Often, companies will offer a surface rights owner a surface use agreement, which can provide financial compensation to the surface owner, or more commonly, offer some concessions on how the minerals are accessed. For example, some surface use agreements require the company to access the property from specific roads or points on the property.
A major issue involving fluid mineral rights is the "rule of capture" whereby minerals capable of migrating beneath the Earth's surface can be extracted, even if the original source was another person's mineral property. Such claims typically are protected by various states' oil and gas regulatory agencies whose broader mandate is to promote conservation and minimize conflicts between mineral owners.

Fractional ownership

Here a percentage of the mineral property is owned by two or more entities. This can occur when owners leave fractions of the rights to multiple children or grandchildren.

Major elements

The five elements of a mineral right are:
  1. The right to use as much of the surface as is reasonably necessary to access the minerals
  2. The right to further convey rights
  3. The right to receive bonus consideration
  4. The right to receive delay rentals
  5. The right to receive royalties
The owner of a mineral interest may separately convey any or all of the above-listed interests. Minerals may be possessed as a life estate, which does not permit a person to sell them, but merely that they own the minerals so long as they live. After this, the rights revert to a predesignated entity, such as a specific organization or person.
It is possible for a mineral right owner to sever and sell an oil and gas royalty interest, while keeping the other mineral rights. In such case, if the oil lease expires, the royalty interest is extinguished, its purchaser has nothing, and the mineral owner still owns the minerals.

Mining claims

A mining claim is the claim of the right to extract minerals from a tract of public land. In the United States, the practice began with the California gold rush of 1849. In the absence of organized government, the miners in each new mining camp made up their own rules, and to a large extent adopted Mexican mining law. The Mexican law gave the right to mine to the first one to discover the mineral deposit and begin mining it. The area that could be claimed by one person was limited to that which could be mined by a single individual or a small group.
The US system of mining claims is an application of the legal theory of prior appropriation, by which public property is granted to the first one to put it to beneficial use. Other applications of appropriation theory were the Homestead Act, which granted public land to farmers, and water rights in the west.
The California miners spread the concept of mining claims to other mining districts all over the western United States. The US Congress legalized the practice in 1866, and amended it in the Mining Act of 1872. All land in the public domain, that is, federal land whose use has not been restricted by the government to some specific purpose, was subject to being claimed. The mining law has been changed numerous times, but still retains some features similar to those settled on by the California 49ers.
The concept was also used in other countries, for example during the Australian gold rushes which occurred at a similar time starting from the 1850s, and included similar groups of people including miners that migrated from the American gold rushes. The Oriental Claims in Victoria are one example of this.
A placer claim is a mining claim on gravel or ground from which minerals are extracted using water.

Staking a claim

In the United States, staking a claim involves first the discovery of a valuable mineral in quantities that a "prudent man" would invest time and expenses to recover. Next, marking the claim boundaries, typically with wooden posts or capped steel posts, which must be four feet tall, or stone cairns, which must be three feet tall. Finally, filing a claim with both the land management agency, and the local county registrar.
There are four main types of mining claims:
  1. Placer
  2. Lode,
  3. Tunnel
  4. Millsite
A mining claim always starts out as an unpatented claim. The owner of an unpatented claim must continue mining or exploration activities on an unpatented claim, or he may pay a fee to the land management agency by September 1 of each year, or it is considered abandoned and becomes null. Activities on unpatented claims must be restricted to those necessary to mining. A patented claim is one for which the federal government has issued a patent. To obtain a patent, the owner of a mining claim must prove to the federal government that the claim contains locatable minerals that can be extracted at a profit. A patented claim can be used for any purpose desired by the owner, just like any other real estate. However, Congress has ceased funding for the patenting process, so at this time a claim cannot be patented.

Claim jumping

A dispute when one party attempts to seize the land on which another party has already made claim is known as "claim jumping".

Leasing

An owner of mineral rights may choose to lease those mineral rights to a company for development at any point. Signing a lease signals that both parties agree to the terms laid out in the lease. Lease terms typically include a price to be paid to the mineral rights owner for the minerals to be extracted, and a set of circumstances under which those minerals are to be extracted. For instance, a mineral rights owner might request that the company minimize any noise and light pollution when extracting the minerals. Leases are usually term-limited, meaning the company has a limited amount of time to develop the resources; if they do not begin development within that time-frame they forfeit their right to extract those minerals.
The four components of mineral rights leasing are:
  1. Ownership
  2. Leasing
  3. The division order
  4. The royalty check