In the classic 1960s sitcom, “The Beverly Hillbillies,” Jed Clampett became a millionaire when he fired his gun into the ground and struck oil. If only it were so simple. Did you know there are two types of ownership to land: surface rights and mineral rights. Let’s look at the differences and how that might affect you as a landowner.
The two aspects of land ownership. Simply put, the owner of the land on the surface may not own the rights to the mineral resources below it. Mineral resources could be oil, gas, coal and metals. In many cases, the surface owner has both, but when there are different owners it is known as a split estate or a severed estate. Separation can take a couple of forms.
Separation by mineral deed. This happens when the owner of both types of rights decides to keep the surface land but sell all or a portion of the mineral rights to another party. Or they may sell the surface to one party and the mineral rights to someone else. When mineral rights are separated from surface rights, a mineral deed is filed with the appropriate land title office, usually at the county level.
Separation by mineral reservation. When the owner of both surface and mineral rights sells the surface, but keeps ownership of the mineral rights below it, it is called a mineral reservation. This is a fairly common practice and is also recorded with the local land title office.
Variations of split estates. Mineral rights, like surface rights, can be subdivided among multiple parties. For example, oil and gas might be deeded to one party, coal to another.
The groundwater in some states is owned by the surface owner, but in others it is owned by the state government as a public resource. Therefore, the owner of the mineral rights must get state permission to mine the resources if it affects groundwater.
Some states provide for a third estate, called the support estate. This literally means the ground supporting the surface estate. If the owner of the surface estate also owns the support estate, the owner of the mineral estate cannot harvest the resources below ground in a way that damages the ground supporting the surface, causing collapse.
In some states the mineral rights revert to the surface owner under certain conditions such as death or if a determined period of time passes and no resources have been mined from the subsurface.
Think all this doesn’t apply to your subdivision home? Some of the country’s biggest home builders have discreetly set themselves up to reap huge gain from the shale oil and gas drilling industry known as hydraulic fracturing, or “fracking.” Some large, national tract home building companies sell to buyers on the surface estate, but retain the mineral rights for the company. Should the fracking industry target the neighborhood, the builder is in line to profit by leasing to the frackers.
Some states do not require sellers to disclose to buyers if the surface rights and mineral rights have been separated, although the paperwork will be filed with county clerk at the land title office. Some builders cover it in their sales contracts. Lenders will sometimes view severed mineral rights as an encumbrance, and won’t lend money on such a property.
