One of the hottest topics in the investment world is mineral rights. In our series on mineral rights this article, part 1, focuses on finding out who owns them.
We start with an important concept in mineral rights that might not be obvious to the average person: that surface rights and mineral rights are two different things. According to the EIA Glossary, mineral rights are:
“The ownership of the minerals beneath the earth's surface with the right to remove them. Mineral rights may be conveyed separately from surface rights.”
Mineral rights convey ownership of the minerals beneath the surface and permission to use as much of the surface as necessary to remove them. But they do not include ownership of the surface property itself.
Whether surface rights and mineral rights are held jointly or not, our search for ownership pedigree starts with the County Clerk (or, for complex cases, a private abstract or title research firm). Usually located near the county courthouse, often you may conduct your title research at no cost other than reprographic fees.
Tracking Mineral Rights
Your goal in this process is to create a chain of title; that is, a record of the documents that show how minerals rights have been conveyed through the years. The chain of title will contain anything that affects the property including outright sales, but also liens, foreclosures, divorce settlements, probate actions and the like that may convey or alter mineral rights.
At times you may encounter what appears to be a “gap” in the records. For example, your research shows a certain owner selling interest to another party, yet you cannot determine how that owner came into title. You’ll need to research this. Perhaps the property went into foreclosure and was sold by a bank (thus being recorded under different ownership in the clerk’s office); perhaps it was misfiled, or is filed in the Assessor’s Office.
Split Ownership of Mineral Rights
Not only are surface rights and mineral rights often conveyed separately, it is also common for the owner to reserve a portion of the mineral rights in a sale. In fact, it’s possible that, over the years, mineral rights have been split among several owners, especially in areas where oil, gas, or mineral production is common.
The point is that careful examination of each document is very important.
Investing in mineral rights can be a very profitable investment strategy. But it can be complicated. Consider putting the professionals at KerNors LLC to work for you. Since 1924 we’ve been helping our clients create and protect wealth.