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What does it mean to “lease” mineral rights?

On Behalf of | Aug 30, 2022 | Gas And Mineral Law, Oil

If you own property that is rich in desired minerals — meaning oil, natural gas and coal — then you may consider selling your land to an oil or gas company. Before you forfeit your rights to your property entirely, consider, first, the idea of leasing it.

A mineral lease works essentially like any other type of lease, be it a lease for a residential home or a lease for a vehicle. Earthworks explains the ins and outs of a mineral lease more in-depth.

What is a mineral lease?

A mineral lease is a legal agreement between an individual who owns property with minerals on it and another party — typically an oil and gas company. The former party is the lessor. The latter party is the lessee. If you sign such an agreement, you grant the gas or oil company the right to explore your property for mineral deposits in the area. If it finds more deposits, it has the right to extract, develop and sell them as they see fit.

Can you regain your rights to the mineral property?

Once you sign a mineral lease agreement, you essentially forfeit your rights to the mineral property and alleged minerals to the lessee. What this means is that you cannot lease the rights to the property to another company or individual during the term of the lease. Moreover, the terms of the lease may prevent you from accessing the land, among other provisions. The only way you can regain full rights to the land is either by letting the lease expire and choosing not to renew it or fighting a supposed breach of contract.

Considerations before leasing mineral property

If you are tempted to lease mineral property to a resource-heavy gas or oil company, there are a few considerations you should make beforehand. First, know that it is always in your best interests to maintain a professional, business-like relationship with the lessee.  Second, get everything in writing, and keep both a copy and an original in safe but separate places. Finally, do your due diligence. Ask neighbors, other mineral property owners and local government agencies about the reputability of the company that wishes to lease your land.

Leasing your land to a corporation can be a lucrative endeavor. However, if you are not careful, you could end up forfeiting the rights to your property for little to no profit. To avoid an adverse outcome, take care in how you lease your land and to whom.