EARTHWORKS

Split Estate

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Credit: The Hindu

In many states, the owners of the land are not necessarily the owners of the minerals.

When the surface and subsurface (mineral) estates are owned by different parties, they are referred to as split estate or severed estate lands.

When you buy a piece of land — or even if the land has been in your family for generations — it is not always evident whether or not you own the minerals. Mineral owners don’t have to inform the surface owner that the mineral rights have been severed (split).

There are ways of finding out whether or not the minerals and land are split estates.

How mineral rights are split from surface rights

The separation of surface and subsurface rights occurs through either a mineral deed, or mineral reservation.

Mineral deed

Severance by mineral deed occurs when someone who owns both the surface and mineral rights chooses to sell all or a portion of the mineral rights to another party.

Another scenario is when the owner of both the surface and mineral rights sells the land to one party and the minerals to a different party.

In either case, the proof of the sale is known as a mineral deed, which is recorded in government land title offices (most often with the county governments).

Mineral reservation

Severance by mineral reservation may occur if a party owning both surface and mineral rights sells the land, but retains (or reserves) all or a portion of the mineral rights. All the mineral owner has to do to preserve title to the subsurface estate is record his or her mineral reservation with the county clerk and recorder’s office or other government land title office.

Mineral reservation has been widely practiced by individuals, land-grant railroads, lending institutions, and federal and state governments.

For example, one of the largest private mineral owners in Montana is Ag America. That company acquired its minerals through mortgage foreclosures on ranches during the 1930s and 1940s. When the company sold the land, it would reserve half of the minerals.

Mineral reservations also often occurred when lands were originally patented (i.e., the federal government sold the land but held on to the mineral rights).

Other split estate considerations

Reconnecting the surface and mineral estates

In some states, mineral rights revert to the surface owner under certain conditions such as death, failure to obtain production, or passage of a specified period of time. It is important to be aware that these types of laws may exist in your state, and they may provide surface owners with the opportunity to take possession of the mineral rights beneath their land. Several states have laws to this effect.


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Tagged with: split estate, oil and gas, mineral rights, leasing

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