Ownership of Minerals is an Estate in Real Property which affords the owner the right to exploit, mine, and/or produce any or all of the minerals lying below the surface of the property. While you do not own the surface land you do own the minerals below ground.
Mineral ownership does not include costs of exploration, drilling equipment, transportation, and marketing. However, as Mineral Owner you receive a percentage of the revenue created from the production of the oil & gas.
Primary Parties in Mineral Ownership
The Mineral Owner – the Mineral owner is the entity which has perpetual ownership of physical oil and gas and the cost-free extraction of those hydrocarbons by the Operator.
- Using Real Estate nomenclature, the Mineral Owner would be the Landlord and the Royalties paid would be the Rental income.
The Operator – the Operator is the entity responsible for the exploration, development, and production of an oil or gas lease. Generally, this is an oil company who most often hires a drilling contractor to extract the hydrocarbons.
- Using Real Estate nomenclature, the Operator would be the tenant.