San Antonio Express-News
May 16, 2006

Passing Title to Mineral Interests

copyright 2006, Paul Premack

In Texas, oil, gas and mineral law is exceedingly complex and has a long history. Long books have been written on the subject, so this is a cursory explanation. A person has ownership and control over the natural resources on and under land that person owns. But the land rights can be split by agreement, so that one party owns the "mineral rights" and another owns the "surface rights."

When the owner of a parcel of land decides to sell, it is not uncommon for the seller to retain the mineral rights. The buyer receives only the surface rights, and must accommodate the mineral owner in a variety of ways; after all, drilling or mining generally cannot take place unless it starts from the surface.

It would be rare for the owner of the mineral rights to have the funds or the expertise needed to extract those natural resources. Thus, companies with the right people, equipment and money may offer to lease the mineral rights from the owner. The company pays pay a fee to obtain the lease, but is usually not obligated to do any particular exploration or drilling. If the company does find resources, it typically pays a royalty for resources it extracts. The parties might also agree that the owner keeps a working interest in any effort to extract resources, which is a higher risk/higher reward venture.

If you own mineral rights, you should have a deed specifying the land area and what share of the resources you may own. The deed will show who the prior owner was (from who you bought it or inherited it). The paperwork many royalty owners see most often is called a "division order" – a form written by the company leasing the mineral rights specifying the share you own and how much your royalty payment should be during a particular time period.

When the owner dies, mineral rights, just like any other interest in real property, pass according to the owner’s Will. If there is no Will then the rights pass according to the state laws of intestacy. Either way, the title change is not "automatic" – it will either involve probate or some other legal change to the deed records in the county where the mineral interest is located (perhaps an affidavit of heirship or termination of a life estate interest).

If a parent, who owns the mineral rights, dies without a Will then the rights should pass to the parent’s heirs at law (most likely the spouse, and if there is no spouse most likely the children). If the land was sold before the parent died, the deed signed by the parent is what dominates. That deed may specify that the purchaser received full fee simple title to the land (both the surface and mineral rights) or may recite that the parent retained the mineral rights.

If the mineral rights were retained, then the buyer only owns the surface rights. The mineral rights remained property of the parent. When the parent died, the mineral rights were passed to the heirs at law. Those heirs need to take legal action to identify themselves so they will receive any royalties to which they are entitled.