Mineral Rights in Real Estate Transactions: Title, Development and Financing Concerns

Description

The term ‘mineral rights’ generally refers to the ownership of subsurface minerals and the right to explore, develop, extract and market the same. Hydraulic fracturing and other technologies have enabled miners to extract oil and gas from underground formations across the country previously thought inaccessible, making mineral rights a more pervasive issue for developers and lenders. Counsel must know how the exercise of mineral rights might disturb construction or operation of a project before proceeding with a transaction.

Mineral rights on a project site are often severed, with a developer owning the surface estate and a third party owning the mineral estate. The mineral rights holder may have express surface rights under a lease or conveyance instrument. Relevant provisions include the type and location of surface-level facilities, environmental indemnities, term and transfer rights. There also may be implied surface rights under state law.

Methods available to resolve mineral rights issues include obtaining a waiver of surface rights from the holder of the mineral estate or entering into a surface rights agreement which limits the project footprint on the site and permits the mineral rights holder to use a particular portion of the surface outside of project footprint. Affirmative title insurance may also resolve the issue.

Listen as our authoritative panel discusses development and financing issues which can arise when mineral rights are severed from property rights. The discussion will include terms to look for in oil and gas leases and other instruments, and methods for resolving surface rights issues.