What are mineral rights in real estate?

Mineral rights are the rights to any natural resources that are present beneath a piece of property, such as oil, gas, coal or even gold. In real estate, this information can be useful when buying or selling a home and the property it sits on — especially if it’s located in an area rich in natural resources or close to mining operations. But owning land does not necessarily mean you own what’s underneath it.

What are mineral rights?

Mineral rights refer to the rights to extract minerals from a parcel of land. This can include the right to mine for precious metals or gems, quarry materials such as gravel and sand, and even drill for oil and natural gas. In many countries, the government holds claim to nearly all mineral rights on its land. That is not the case in the U.S. Here, a landowner typically also has the mineral rights to that piece of land — but not always. Sometimes, the rights to what’s underground are separate from the above-ground or surface rights.

Mineral rights vs. surface rights

Surface rights literally refer to the land at the surface of a property: in real estate terms, the actual ground a home is built on. When you buy a home and the land it sits on, be it a small backyard or a tract of several acres, your surface rights mean you can plant a vegetable garden, install landscaping, grow flowers, and the like. But you might not be able to, for example, drill for oil in your Texas backyard. For that, you’d need to own the mineral rights, which grant ownership to the resources below the surface. This can include the right to explore for, extract and — crucially — profit from any valuable resources found.

If you suspect there may be deposits beneath your land, a thorough title search can help uncover exactly what you own and do not, and it’s smart to consult an attorney who is experienced in these matters as well. Be especially careful if you’re located in an area where prior mining may have taken place, as underground shafts and tunnels can create hazardous conditions. Check the historical record in your area — mining companies may have filed maps with a state or city agency, or even with the local library.

Mineral rights vs. groundwater rights

Do not confuse mineral rights with groundwater rights. You may think you can drill a well on your own property and take whatever water you need, but you may not have the legal right to do so. Groundwater rights are typically subject to a different set of laws and regulations, which vary by state, so again, it’s wise to consult with an attorney.

How do mineral rights work?

Legally, the combination of surface rights and mineral rights on a property is referred to as an estate. If the same owner retains both sets of rights, that is a “unified estate,” meaning the rights are unified under one owner.

If there’s something extremely valuable underground, a property owner can elect to sell the mineral rights to another party, while retaining the surface land rights to live on or develop as they see fit. This is complicated but understandable: Mining is expensive, so mineral rights owners must have deep pockets to finance the operation. And even if they have the money, the average homeowner probably has no idea how to mine for ore, or drill for oil, nor would they have the equipment needed. This situation is called a “severed estate,” because the mineral rights have been severed from the overall property rights. Laws concerning severed estates differ from state to state, often depending on the richness of resources in the area, so make sure you know the law in your state.

If you’re buying or selling a home, it’s important to check the deed carefully to determine whether the mineral rights are legally the owner’s to sell, or whether they belong to someone else. In some cases, mineral rights may even belong to a corporation. In others, they might belong to whomever owned the land at the time the minerals were discovered (often called the “rule of capture”). These rights do not always transfer with the sale of the property.

Note that even if you do own a property’s mineral rights, sub-surface boundaries don’t necessarily work the same way surface boundaries do. With oil or gas, if the deposit is under several parcels of land with different ownership, whoever taps the pool might be able to extract all of it. This is sometimes called slant drilling — and is another good reason to have a real estate attorney on your side.

How can I find out if there are valuable minerals on my land?

The top 10 mineral producing states in the U.S., per the United States Geological Survey, are Nevada, Arizona, Texas, California, Minnesota, Florida, Alaska, Utah, Missouri and Michigan. If you live in one of these states — or even if you don’t — there are several ways to determine if there are valuable minerals lurking beneath your property:

• One of the best is to commission a geological property survey. These surveys can be costly, but they are thorough and accurate.
• You might also hire an appraiser or geologist to look at the survey and make an informed assessment of the land’s mineral value. Their report can give you an idea of how much the minerals might be worth, and whether they’re worth pursuing.
• In some areas where mining is prevalent, you can hire a mining specialist to do a more in-depth survey.
• Try searching online. The USGS site offers a wealth of information about mineral resources in the United States.
• If all else fails, use your detective skills: Google the locations of the nearest mines and drill sites, drive the area looking for signs of drilling and consult the local press for news about discoveries.

Bottom line

Mineral rights are complex, and they may or may not be tied to traditional land ownership. But they can be very lucrative. According to USGS, American mines produced more than $82 billion in minerals in 2020 alone. Of course, you’re not likely to find billions in your backyard — but you never know.