Mineral & Surface Rights 101: What to Ask Before Closing

From The Beverly Hillbillies to Landman, popular TV shows have romanticized striking it rich with oil. But plot lines of landowners tapping into vast oil reserves on their property overlook an essential legality: mineral rights. One of the biggest misconceptions is that mineral ownership and surface rights are the same thing. As an expert in rural lending, AgTrust is here to be your trusted advisor, so when you purchase land, you fully understand what you are — or aren’t — gaining the rights to.

What is the Difference Between Surface Rights & Mineral Rights?

When purchasing property, you should always clarify mineral and surface rights because they can be owned separately. If a third-party owns your land’s mineral rights, they could have access to your property and disrupt your use of the surface for oil, gas or mineral extraction activities. We recommend our buyers ask these specific questions and perform thorough due diligence before closing to understand what they are buying and avoid future conflicts.

• Have the mineral rights been severed or sold in the past?
  Severed property rights mean specific ownership rights, like the right to extract oil, gas or minerals, have been legally separated from the surface, creating distinct ownership of what’s below the surface of the land and what’s on or above the surface. This is the most important question, because if the mineral rights have been separated, you may only be purchasing the surface rights.
• Is the seller retaining any portion of the mineral rights?
  Fractional ownership occurs when multiple people or entities hold the mineral rights. Ask the seller if they are reserving all or a percentage of the mineral rights for themselves.
• Can you provide a title report or mineral search showing who owns the mineral rights?
  The seller should provide documentation verifying ownership. If they do not, AgTrust can point you to a professional who can research that information.
• Are there any existing leases with oil, gas, or mining companies?
  If a lease exists, the operating company has the right to access the property, and you should ask for copies of all lease agreements to review their terms.
• Does any existing lease include a ‘surface use agreement’?
  This agreement should outline where drilling or mining can occur, specify compensation for surface damages, and detail reclamation obligations after extraction.
• Is the area zoned for mineral extraction, and have any neighboring properties experienced drilling or mining activity?
  Understanding local activity can indicate the likelihood of future development on your land.
• What are the implications for property value and land use if mineral extraction occurs?
  Mineral rights ownership can significantly impact land value and potentially limit your ability to develop or enjoy the surface of your property.

Your Due Diligence Checklist for Mineral Rights in Texas & New Mexico

To have confidence in the land you’re buying and ensure a smooth closing process, AgTrust can help you get buttoned up on these important items.

The property deed and a comprehensive title search are the primary ways to determine if mineral rights were previously separated from the surface rights. We can assist you with reviewing the deed and title report.

Calling on the assistance of professionals is also advisable. We can refer you to local real estate attorneys and/or title companies who are experienced in mineral rights to perform a thorough title examination. Land ownership is often passed down to family members over decades or even centuries, so it’s important to have someone who knows how to trace a complex chain of title.

Country records are another important source of information. You can visit the county clerk’s or recorder’s office to manually search property records and deeds for any reservations or prior sales of mineral rights. In addition to those records, you should also check the website of the Railroad Commission of Texas and New Mexico’s Oil Conservation Division for information on drilling permits and production in your area.

Completing this due diligence checklist will help you understand the property rights you are acquiring and ensure that the purchase contract is clear and explicitly states whether mineral rights are included in the sale. If the contract is silent on the matter, problems can arise later.

A Trusted Partner for Your Journey

For more helpful resources, we’ve put together The Ultimate Land Buying Guide Texas and The Ultimate Land Buying Guide New Mexico. AgTrust has the connections and network you need to gain a clear understanding of your rights and obligations, so your property is protected. Ready to get started today? Fill out the form below or contact us and our local team will get to work helping you realize your land-buying dreams.