Mineral estate
Owning mineral rights (often referred to as a "mineral interest" or a "mineral estate") gives the owner the right to exploit, mine, and/or produce any or all minerals they own.Types of mineral estate
Unified estate
Unified estates, sometimes referred to as "fee simple" or "unified tenure" mean that the surface and mineral rights are not severed.Severed/split estate
This type of estate occurs when mineral and surface ownership are separated. This can occur from prior ownership of mineral rights or is commonly performed when land is passed between family generations. Today corporations own a significant portion of mineral rights beneath private individuals.Fractional ownership
Here a percentage of the mineral property is owned by two or more entities. This can occur when owners leave fractions of the rights to multiple children or grandchildren.Severed/split estate
Mineral estates can be severed, or separated, from surface estates. There are two main avenues to mineral rights severance: the surface property may be sold and the minerals retained, or the minerals may be sold and the surface property retained, though the former is more common. When mineral rights have been severed from the surface rights (or property rights), it is referred to as a "split estate." In a split estate, the owner of the mineral rights has the right to develop those minerals, regardless of who owns the surface rights. This is because in United States law, mineral rights trump surface rights. The U.S. historical precedent for this severance roots from western expansion and The Land Ordinance Act of 1785 and The Northwest Ordinance Act of 1789 at the cost of dispossessed Natives. Severability was further reinforced by the Homestead Act of 1862 (OHA) and the 1862 Railroad Act. Agricultural patents and the CaliforniaMajor elements
The five elements of a mineral right are: # The right to use as much of the surface as is reasonably necessary to access the minerals # The right to further convey rights # The right to receive bonus consideration # The right to receiveMineral rights leasing
An owner of mineral rights may choose to lease those mineral rights to a company for development at any point. Signing a lease signals that both parties agree to the terms laid out in the lease. Lease terms typically include a price to be paid to the mineral rights owner for the minerals to be extracted, and a set of circumstances under which those minerals are to be extracted. For instance, a mineral rights owner might request that the company minimize any noise and light pollution when extracting the minerals. Leases are usually term-limited, meaning the company has a limited amount of time to develop the resources; if they do not begin development within that time-frame they forfeit their right to extract those minerals. The four components of mineral rights leasing are: # Ownership # Leasing # The Division Order # The Royalty CheckOwnership
There are three distinct but related aspects of ownership. They are: * Legal description * Net mineral acres * Ownership typeOwnership Types
Leasing
To bring oil and gas reserves to market, minerals are conveyed for a specified time to oil companies through a legally binding contract known as a lease. This arrangement between individual mineral owners and oil companies began prior to 1900 and still thrives today. Before exploration can begin, the mineral owner (lessor) and the oil company (lessee) must agree to certain terms regarding the rights, privileges and obligations of the respective parties during the exploration and possible production stages. Although there are numerous other important details, the basic structure of the lease is straightforward: in exchange for an up-front lease bonus payment, plus a royalty percentage of the value of any production, the mineral owner grants the oil company the right to drill for a period of time, known as the primary term. If the term of the oil or gas lease extends beyond the primary term, and a well was not drilled, then the Lessee is required to pay the lessor a delay rental. This delay rental could be $1 or more per acre. In some cases, no drilling occurs and the lease simply expires. The duration of the lease may be extended when drilling or production starts. This enters into the period of time known as the secondary term, which applies for as long as oil and gas is produced in paying quantities.The division order
A division order is not a contract. It is a stipulation, derived from the lease agreement and other agreements, as to what the Operator of a well or an oil and/or gas purchaser will disburse in terms of revenue to the mineral owner and others. The purpose of the division order is to show how the mineral revenues are divided up between the oil company, the owners of the mineral rights (royalty owners) and the overriding royalty interest owners. The Division Order needs a signature, a current address and social security number for individual royalty owners or tax identification number for companies.Oil and gas lease
An oil and gas lease is a contract because it contains consideration, consent, legal tangible items and competency. *The term of the lease. Usually there is a primary term and a secondary term. Each term has conditions set up either by the lessor or lessee to fulfill. *The royalty rate. This is how the rates are divided and how it is calculated from the revenues produced from the mineral rights. *If the lessor receives a bonus *If there is a delay rental agreement—any delay in production by the lessee for a negotiated period, the lessee can pay the lessor a negotiated amount of money per year to keep the contract active *If there is a "shut-in royalty" agreement—royalties are paid at a negotiated rate per acre, only while the well is not producing oil or gas Many other line items can be negotiated by the time the contract is complete. The rights of all parties are defined in agreements; and, when mineral production begins, the division order states how much revenue goes to each party involved.Royalty check
Mineral owners may receive a monthly royalty check if oil, gas, or any other substances of value are extracted from below the surface and either sold or used by an oil and gas operating company. Royalty statements include the production and revenue figures for both the individual owner and the entire well. The royalty paid is a function of the net value of the proceeds from the sale of the oil, gas, or other substance, multiplied by the owner's revenue interest decimal, less any amounts deducted for taxes or other deductions. The revenue decimal used to calculate the amount of an owner's royalty check is calculated with the following equation: * A = Net Mineral Acres owned * U = Number of Mineral Acres in the oil and gas drilling unit or pool * R = The Royalty assigned to the mineral right owner by the oil and gas lease covering his or her minerals * P = Participation Factor assigned to the tracts owned by the mineral owner as described in a unit agreement * Y = Additional Ownership Factor assigned to the owner's mineral rights by any other arrangement or agreement * D = Deductions Revenue interest decimal It is common for royalty checks to fluctuate between pay periods due to monthly changes in oil or gas prices, or changes in the volumes produced by the associated oil or gas wells. Additionally, royalties may cease altogether if the associated wells quit producing marketable quantities of oil or gas, if the operating company has changed hands and the new operator has not yet established a new payment account for the owner, or if the operating company or product purchaser is missing appropriate paperwork or proper documentation of changes in ownership or contact information.Surface use agreement
A surface use agreement (SUA) is a contract between a property owner and a mineral rights holder that dictates how the mineral rights are to be developed. Meaning, when mineral rights are extracted by a company that does not own the property above where the minerals are located, the company has the legal right to extract those minerals regardless. However, companies will often enter into voluntary negotiations with the surface rights owner to ensure that the operations all go smoothly. In such cases, the company will offer a SUA, in which property owners may ask for financial compensation or other concessions regarding how the minerals are extracted. See sample.See also
* Air rights * Bergregal - mining rights in Europe *References
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