Mineral Royalties
Understanding Royalties
Mineral Rights
What Are Mineral Rights?
Mineral rights are the rights to develop minerals, the hard asset lying beneath the surface of a piece of land.
When Are They Developed?
Oil and gas minerals are developed in a manner similar to real estate development.
How Are They Purchased?
In most areas of the United States, mineral rights are “severable” from the underlying surface lands, which allows minerals to be bought and sold, independent of the surface land.
What is the difference between non-producing and producing minerals?
Non-Producing Minerals
Non-producing minerals do not yet have a well on the surface. Owners of the minerals can lease the rights to a company for a specified term, usually three years. Oil and gas companies aggregate mineral leases to form large drilling units, then attempt to drill and complete wells during the primary term of the lease
Producing Minerals
Once a well is completed and begins extracting the oil or gas from below the surface, the minerals are then classified as “producing.” As long as production continues, the company is allowed to drill wells and develop the property as it sees fit, according to the terms of the lease.
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