What Are Mineral Rights?

To fully understand investment opportunities in the oil and gas industry, it is vital to comprehend mineral rights ownership. When it comes to oil and gas extraction, who profits and how can depend mainly on their mineral interest — as well as the mechanism of purchasing mineral rights and receiving mineral rights royalties.

We talk about a land’s mineral rights to distinguish it from surface rights. Surface rights are the rights most people are looking to assume when they buy a tract of land. It is the right to use and improve upon the surface of the area, building homes, gardens, business facilities, garages or whatever else they would like to have.

Mineral rights deal with what is underneath the surface — ores like iron, gold or copper, precious rocks and, of course, crude oil or natural gas. If you have the mineral rights to land, you have the rights to everything underneath the ground.

Who Owns the Mineral Rights?

In many countries, the government owns the mineral rights to all land by default. In the United States, the initial purchase of a parcel of land is assumed to include both surface and mineral rights. If the property is resold, the owner may choose to make an arrangement where they retain the mineral rights. However, if this is not explicitly stated, they will go along with the surface rights.

What Does One Do With Mineral Rights?

If someone owns a piece of property and the mineral rights that go along with it, the issue of mineral rights usually only comes into play if that entity becomes aware of valuable assets, such as oil or gas, beneath the surface. If they do learn of oil or gas resources on their property, they have several choices:

  • They can choose to sell the property outright, surface and mineral rights together, at a much higher price than when they purchased it, to another entity — presumably an oil or gas extraction company
  • If they choose to keep the property, they can lease the mineral rights to an oil or gas extraction company. That company will have the right to set up oil or gas wells on the property and extract as much oil or gas as they can for themselves, paying the owner of the mineral rights a royalty for the oil or gas they sell. If the owner chooses this route, he is said to have a royalty interest in the well or wells.
  • The owner can also choose to set up their own gas or oil extraction operation, either on their own or with a partner. In this case, they and their partners keep all the profits, but also must carry all the expense and risk. This is referred to as having a working interest in the well.

Contact Viper Capital Partners to Learn More

For more information about mineral rights, working interests and how you can invest in oil and gas extraction, contact Viper Capital Partners today