Real Estate Market Woes: Mineral Rights in Texas
According to property law, two different forms of rights exist in any real property: surface rights and mineral rights. Surface rights refer to any structure erected above the surface or sub-surface structures that do not exceed a certain depth, as well as rights to use all surface property surrounding structures in accordance with zoning ordinances. Mineral rights refer to mineral substances below a certain depth and the way in which they are preserved, explored or extracted. These mineral substances can include natural gas, oil, or any other substance in common use today that can be mined or otherwise extracted from below the surface. Local laws set the depth below which surface rights terminate and mineral rights exist. This issue is especially relevant to residents of the Dallas/Fort Worth area, as sections of the Barnett Shale running under Fort Worth have been found to hold large stores of precious minerals, and oil and gas companies are moving quickly to act on those stores.
But why are mineral rights so valuable - and thus so controversial? Because in this day and age when any available source of natural gas and oil are being exploited in order to fuel our fuel-based economy (pardon the pun), pockets of minerals in traditionally non-traditional drilling and extraction areas are being considered by oil and gas companies for production. While this can mean lucrative signing bonuses, lease and royalties to homeowners beneath whose property precious minerals exist, it can also mean huge headaches due to unsightly equipment, disrupted property due to exploration attempts, loud noise due to drilling efforts and diminished property resale values because of poorly handled extraction and exploration techniques and the blight they can potentially place on a community. Once the owner of mineral rights for a property signs a lease with an oil and gas company, it is the oil and gas company who, in effect, hold the mineral rights.
But not all exploration and extraction is bad! Oil and gas companies can employ techniques including horizontal drilling to extract without any disturbance to any homeowner or land. Horizontal drilling involves drilling straight down and then horizontally under a large plot of land from a distant location to extract minerals with reduced disturbances. Typically, homeowners will be approached by an oil and gas company and offered a signing bonus to sign a lease for the use of their mineral rights for a set period of time, and also offered periodic compensation based on a percentage of the minerals extracted. While this can be lucrative, it is also important to weigh possible financial gains against future (or present!) real estate woes.
First, and most disturbing, is the fact that the Texas Supreme Court has found that mineral rights are superior to surface rights. What this means is that although oil and gas companies will often promise to keep all disturbance removed from actual residential settings, if it is necessary to conduct further exploration that necessitates the use of your land, whomever owns mineral rights or possesses a lease to mineral rights can enter your land at any point in time with no notice, and you cannot receive compensation for any damage caused by their incursion on your property except if the damage is caused maliciously.
Second, and nearly as disturbing, is that homebuyers are often ignorant to the fact that sellers often do not convey mineral rights along with surface rights, choosing instead to retain rights and thus retain possibly lucrative royalties. The disturbing part is that once mineral rights are severed from surface rights, they remain as two different properties into infinity. Even if the same person should own both again in the future, they could never be rejoined as one property. This can make resale of a house where the seller does not possess mineral rights very tricky. The irony is that there is a direct correlation between the signing of oil and gas leases and the inflation in property value (as long as exploration and extraction is conducted discreetly) but many sellers expect to retain the very right that helped their home to sell at a higher price.
Finally, it is shocking to find that many homeowners themselves do not know if they possess the mineral rights to their own property. Due diligence is always necessary when making a home purchase, but if, as a homeowner, you find yourself several years into your ownership, you can always conduct more research by doing a title search and conveyance search to find out if you do, indeed, have full rights to your property. Do not allow manipulative realtors or lawyers to convince you that mineral rights are "no big deal" and do more research for yourself to see how others have been affected when they lack mineral rights to a property where they only possess surface rights.
In my homebuying experience, it all worked out for the best. By holding out and showing our stubborn side, my husband and I will soon be the proud new owners of a lovely property in Fort Worth - and thanks to our perseverance and research, we will take possession of both surface AND mineral rights.
Published by Tiffany Aller
A busy HR professional, Tiffany still finds time to indulge her passion: freelance writing and editing. View profile
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- The Texas Supreme Court holds that mineral rights are superior to surface rights.
- Mineral rights and surface rights, once severed, remain two separate properties to infinity.
- Possessing mineral rights can be lucrative, but can also protect your surface property.
9 Comments
Post a CommentMany people buying land in Texas (or other mineral rich areas) encounter the concept of severed estates for the first time. In general, the ownership of real estate carries with it the right to use and develop from the surface to the center of the earth. In Texas, however, most real estate has been severed so that the surface estate is separately owned from the mineral estate. This means that while you may own the surface, someone else probably owns what's underneath (minerals on the surface belong to the surface owner).
As you might guess, in Texas the right to develop the mineral estate trumps the surface owner's right to stop someone from developing the mineral estate. The mineral rights holder has to pay the surface owner a reasonable rental fee for any portion of the surface used to develop the mineral estate--e.g., for the surface used to place a well--but the surface owner cannot stop the mineral rights owner from developing the mineral estate. Of course, there a
I don't know of anyone in Texas who would sell their mineral rights with their land, especially if they are sitting on the Barnett Shale. Try to find 40 acres in that area for sale with minerals. Energy companies require at least 40 acres before they will drill. The courthouse is full of oil and gas men pouring over the land records DAILY trying to find someone that will sell their mineral rights. We searched for 100 acres of property for 3 years in north and east Texas and no one will sell their mineral rights.
Much needed info for many would-be homebuyers. We're dealing with our own issues here in East TX, but it seems to be a potential deal-breaker no matter where you are. The "gentleman" that did the name calling is surely a sheister, quite possibly a realtor.
Great INFO!!! Very Informative. That other guest was really rude. (thumbs down)
Thanks for the very informative expose, I am in the process of buying a home myself in Grapevine, TX and will demand to have the minerals rights. Since you seems to be very knowlegeble, I did see that you mentioned that once the mineral right have been leased to a company the company have them for the period of the lease. Now is that contract no longer valid once the seller agree to sell the right to me along with the propety? I find that anoying to know that the former owner would receive royaltyies from my property. Is there a way to void that contract with the oil company and re=negociate since I will now own the house. Thank you so much for you helpful post.
Because I very much believe in free speech, I will not delete your comment. I would advise you, however, to think twice before you again rebuke a writer using insults and derisive speech, and to ensure that you have your facts straight before you tell other people that they are wrong. I would also advise you to back up your claims and allegations with actual fact or by creating some basis for your having an opinion. Because you have not done so, there is no reason to think that you know anything about this topic.
Best wishes,
Tiffany A. Aller
Furthermore, home value per local appraisal districts are also impacted because of mineral rights. Our total property value has increased by 7% - an increase that is directly attributed to and taxed as mineral rights that we lease to Chesapeake oil. In addition, other groups - including real estate professional associations - have used my article as a way of advising both potential buyers and sellers. That, in itself, shows the value of the information presented, as those who have used my article are true experts in the real estate field.
Mr. Wilson - Unfortunately, you are the one who is uneducated. First, when trying to prove a point, it is more than just bad form to call names. It is damaging to any credibility you might have earned. Second, you obviously are not familiar with the north Texas real estate market and the affect of mineral rights on housing prices. My knowledge is based not only on first hand experience of the process of homebuying when mineral rights were at stake, but also on extensively studying multiple studies conducted by organizations including Texas A&M University and several legal advocacy groups. The bank did not grant our loan until it was confirmed that mineral rights were attached, as the appraiser indicated that resale value would be hurt unless both surface and mineral rights remained intact.
You're an idiot and uneducated. Severing mineral rights from surface rights is commonly done, and has essentially no effect on your home price. When you got your loan for your house you'll find that neither your bank nor your appraisal gave any consideration to whether you do or do not have mineral rights. Don't scare people with your misinformation and nonsense!