I get a lot of questions about mineral rights when my clients are buying and selling land here in Texas. Let me take a second to say that, “I am not an attorney or a landman, nor am I an expert in mineral or surface rights”. You must also know that mineral rights do vary from state to state and I will be conveying information that only pertains to Texas law. Now, back to the story… In a real estate transaction, the Seller has to overtly assert their claim to their existing mineral rights in the promulgated TREC real estate contract in order to preserve those rights. If the seller does not make a claim to the ownership rights, then they are automatically conveyed to the buyer.
Its been my experience that most of the time the seller doesn’t know for sure how much of the mineral rights they own. Unless there has been a title chain of custody search, no one can say for certain, who owns what. I can tell you that in most instances there will be more than one owner that has an interest in the mineral rights. Over hundreds of years the mineral rights can get split up with each sale of the land. You may find that the original owner of the land had a Spanish land grant, which gave him 100% of the mineral rights and in his will he subsequently gave each of his five heirs 20% interest in the property’s mineral rights. Then those 5 heirs dilute their 20% among their heirs and so on. You can see how this can get complicated over time to know who really owns what.
A buyer or seller can hire a representative to perform a “title chain of custody” search, which will shake out all of the parties that own an interest in the mineral rights of a given property. These search experts are generally known as a “landman” or a “petroleum landman,”. An oil and gas attorney is another resource for this type of work. You can do it yourself if you have the time and patience, but I wouldn’t recommend going it alone on something this important. You can hire a landman to go to through the title records at the courthouse of the county where the land is located. Some ranches cover multiple counties…oh boy, this just got more expensive. Depending on the complexity of the situation it could take days, weeks or months to figure out the ownership puzzle. A landman charges anywhere from $300-$500 per day to search out the ownership, so you need to weigh out how important this information is to you.
Some of things that concerned me and are pertinent, given I live and sell real estate in the Texas Hill Country, is the quarrying of limestone, sand and gravel. I haven’t met anyone that want’s the owner of the mineral rights to their land to come open up a quarry and start pulling out limestone and gravel. After reading this state court ruling I feel better. Although I’m not sure what limestone is considered to be valuable enough to make cement. I reiterate my earlier advice…consult a landman or an attorney who specializes in mineral and surface rights.
In Heinatz v. Allen, 217 S.W.2d 994 (Tex. 1949), the Supreme Court was faced with a severance of the surface and mineral estates pursuant to a will, where “the surface rights exclusive of the mineral rights” were devised to one beneficiary and “the mineral rights” were devised to another beneficiary. The heir who obtained the mineral rights entered the property and began to quarry limestone. The surface owner objected and filed suit, claiming that limestone could not be considered a mineral for the purpose of the devise and, therefore, it belonged to the surface estate. In addressing ownership issues, the Court stated: In our opinion substances such as sand, gravel and limestone are not minerals within the ordinary and natural meaning of the word unless they are rare and exceptional in character or possess a peculiar property giving them special value, as for example sand that is valuable for making glass and limestone of such quality that it may profitably be manufactured into cement. Such substances, when they are useful only for building and road-making purposes, are not regarded as minerals in the ordinary and generally accepted meaning of the word.
My other concern was mineral rights that have been divided among different people, be it family, unrelated people or corporations. It turns out that even if you own a fraction of the mineral interests in a property, you can do exploration on the land whether or not the other mineral co-owners want you to. The co-owners can join in on your lease or make their own deal, but as a mineral owner, you do not have to have consensus of the co-owners to lease the land for exploration. I have included a legal case which sets precedent in Texas law concerning co-owners or co-tenants.
The general rule is that any co-tenant who has the right to develop the mineral estate can do so even in the absence of consent from the other co-owners. In Willson v. Superior Oil Co., 274 S.W.2d 947 (Tex.Civ.App.-Texarkana 1954, writ refd n.r.e.), the court stated: Each co-tenant may enter upon the premises for the purpose of exploring for oil and gas and may drill and develop the premises. In the absence of a joint agreement, upon discovery of oil and gas, the producing co-tenant must account to the non-consenting or non-producing co-tenant for his pro rata share of the net profits, that is, the market value of the oil or gas produced, less necessary and reasonable expenses incurred in producing and marketing same; and if a co-tenant drills a dry hole, he does so at his own risk and without right to reimbursement from his co-tenant (in the absence of an agreement therefor) for the drilling costs. 31 Tex.Jur., Sec. 11, pp. 36-37; Burnham v. Hardy Oil Co., supra; Prairie Oil & Gas Co. v. Allen, supra; Earp v. Mid-Continent Petroleum Corp., supra.
I hope this brief look into mineral rights has been helpful to you. If you would like to contact me about buying or selling property in Texas please contact me at Larry@BanderaTexasRealEstate.com