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What Is Mineral Rights Leasing?
The importance of energy, oil, coal, and other minerals and natural resources is very evident throughout the world. The demand for commodities such as oil and gas is increasing and many energy and mining companies are on the lookout for land and properties rich with minerals. With energy and mining companies looking and mineral rights owners possessing the potential to get a big profit, mineral rights leasing is undeniably a growing trend in the real estate market and energy/mining industry.
But what is mineral rights leasing all about?
A mineral rights lease is a formal agreement between two or more parties where one party gives the other the right to make use of the minerals in the property involved. In a situation between a mineral rights owner and an energy and mining company, a mineral rights lease is where the owner of the land and/or mineral rights gives the energy and mining company to drill or mine away the minerals underneath the ground.
The mineral rights owner gets benefits in return, of course. The mineral rights owner can get a bonus payment, royalties for every product (that resulted with the minerals) sold, and any other conditions that both parties have agreed to in the contract.
Mineral rights leasing is a complicated matter. This is because it doesn’t just concern the mineral rights owner and the energy/mining company. In some cases, it concerns the surface rights owner who may not be necessarily be the mineral rights owner.
The mineral rights owner may not necessarily be the surface rights owner for the particular reason that mineral rights are not the same as surface rights. Both are different from each other. While surface rights refer to the rights to work and operate on and above the surface, mineral rights pertain to the rights used to explore and produce the minerals below the surface.
In cases wherein the surface rights owner isn’t the mineral rights owner, one would have to speak to both the owners to get permission to operate on the property for the minerals. While the surface rights owner may not have any say in the operations to extract the minerals, it is still his/her property that will be involved. It is his/her property that will be bombarded with big machines and workers. Disagreements and disputes may erupt before and during the mining operations so all parties should be accounted for. It is wise to be specific of every detail involving all parties’ conditions in the mineral rights lease to prevent future problems.
As implied by the definition of mineral rights leasing, this is no simple matter. Mineral rights leasing is complicated from the start to the end of the operations. The contract is a very big deal, and legalities have to be satisfactory for all parties to be in agreement. When problem comes before the parties about the rights of each one of them, it’ll be the contract or lease agreement that’ll steer them all clear. Make sure to consult lawyers regarding mineral rights leasing. Asking for help from geology surveyors and real estate agents is also recommended.
Problems With Mineral Rights Leasing
As many people dealing with mineral rights probably knows, mineral rights leasing comes with problems and setbacks. These problems are not easily resolved either, and takes time to overcome. Nevertheless, they can still be solved and taken cared of.
One problem that both parties would have to gloss over mineral rights transactions are the legal procedures. This would include the mineral rights lease and terms of agreement. The wording of the lease agreement has to be very clear to both parties to avoid future disagreements. Problems and disagreements especially arise when the moment comes for mineral extraction. Mineral extraction has such heavy requirements like the expansive use of the land and surface, not too mention the amount of damage it can cause for the surface owner.
This is one of the main reasons why seeking legal help is needed when negotiating with a mineral rights lease. It is also advisable for both parties to have sufficient knowledge on the subject. Respect for the terms in the lease is also needed from both parties. The lease agreement should contain specific details if needed to ensure that there will be less, if not none, disputes in the future.
Legal issues aside, other problems can arise from mineral rights transactions. Damages to the land and property are the main concerns when mineral extraction is underway. It is not only during the extraction, too. Damages to the surface can appear years after the mining and extraction is complete. This would certainly be a headache for owners of fee simple estates. The effects and damages of mineral extraction can ruin the property and will become a problem for the subsequent owners of the area. Take note that the effects can appear many years later, and by this time the mining company may already be gone. No one would then be held responsible and any repairs to the damages would be a burden for the remaining owner of the property.
Aquifers and water supply can also come under fire with mineral extraction and mining. Places where underground extraction takes place are outside of the service of public water supplies. The people would have to content themselves with water wells for water. If the extraction is below the aquifer units tapped by the well, most probably the aquifer would be damaged by the extraction and the water water would drain into deeper rock units. This would lead to a temporary or permanent loss of water supply.
What is important in mineral rights leasing is that all the parties involved should understand wholly what they’re getting into. Mineral rights extraction can cause the surface owner many disadvantages, not only in the present time but also in the future. Legal representatives or lawyers should take care to research carefully and make sure their clients understand the agreement and terms.
When in the midst of negotiations, the leasing terms and agreement is what is to be focused on. Again, both parties should have legal help and should also have full knowledge of the terms. Understanding the risks and the many possibilities in the future is also part of the process. Business such as this naturally have its big problems, and while still early the parties involved should make adjustments.