seller keeps mineral rights?

[clarkfan1979]

I am looking to purchase a vacation rental in the Rocky Mountains. The purpose would be for personal use as a second home, not really as an investment. Although the plan would be to break even on monthly cash flow from short-term rental income.

Every now and then there is a property within my price range that is 10-20 acres. I just saw one yesterday that is 20 acres, but the seller gets to keep the mineral rights. I don't really care about the mineral rights, but should I?

Anyone have any experience with that type of transaction?

[GilesMM]

I'd be careful as the mineral rights holder in most states can do whatever they like on your property to extract, for example, oil and gas, as long as it is reasonable.  They can drill wells, lay pipelines, install pumpjacks, etc.  And you would get no compensation while someone else rakes in cash from the oil produced in front of your nose.  Much better if you own the surface and mineral rights.

[Dee18]

I don't know the current law, but years ago I researched this and owners of mineral rights were allowed to strip mine as long as they "restored" the surface afterwards.

[Michael in ABQ]

If there is no mining in the area (oil & gas, gravel, sand, etc.) the risk may be pretty low that the owner of the mineral rights will ever do anything with them. However, if they owns all the mineral rights in the surrounding area (as opposed to just this 10-20-acre parcel) the risk is higher.

Oil & gas companies want to work in large areas where they can buy or lease lots of mineral rights - not just a single isolated parcel.


I would certainly want a discount on the land - or some sort of agreement or deed restriction that no mineral extraction could occur within a certain distance from the house.

[bacchi]

I don't know the current law, but years ago I researched this and owners of mineral rights were allowed to strip mine as long as they "restored" the surface afterwards.

This is what I'd be worried about. If it's in the mountains, they might put a mine on the back 10. Some mines are small but it'd still be a hole in the ground and traffic and a generator.

[sonofsven]

I've seen this, too. I would never buy a property with those conditions.

[Weathering]

Maybe the seller does not own the mineral rights (the person they bought the property from kept the mineral rights). If you were to buy the property and then in 10 years sell it, you would be selling the property without the mineral rights.
Would be good to determine exactly who owns the mineral rights and why. Maybe the mineral rights are owned by the town (that’s how things were organized at my Texas house, and the oil/gas extraction was miles away) or other rational explanation.

[clarkfan1979]

If there is no mining in the area (oil & gas, gravel, sand, etc.) the risk may be pretty low that the owner of the mineral rights will ever do anything with them. However, if they owns all the mineral rights in the surrounding area (as opposed to just this 10-20-acre parcel) the risk is higher.

Oil & gas companies want to work in large areas where they can buy or lease lots of mineral rights - not just a single isolated parcel.


I would certainly want a discount on the land - or some sort of agreement or deed restriction that no mineral extraction could occur within a certain distance from the house.

I don't think there is any oil and gas in the area. I think it's mostly gravel, sand, etc... I like the suggestion that mineral extraction has to be a certain distance from the house, just to be safe. Based on the steep topography of the land and difficult weather conditions at 11,000 ft., I seriously doubt it would be profitable to extract gravel at that location in my lifetime. I do see gravel pits at lower elevations about 15 miles away on large tracts of land (100 acres?) that have very flat topography.

I guess I could also ask how much it would cost to buy the mineral rights? 

[Michael in ABQ]

If there is no mining in the area (oil & gas, gravel, sand, etc.) the risk may be pretty low that the owner of the mineral rights will ever do anything with them. However, if they owns all the mineral rights in the surrounding area (as opposed to just this 10-20-acre parcel) the risk is higher.

Oil & gas companies want to work in large areas where they can buy or lease lots of mineral rights - not just a single isolated parcel.


I would certainly want a discount on the land - or some sort of agreement or deed restriction that no mineral extraction could occur within a certain distance from the house.

I don't think there is any oil and gas in the area. I think it's mostly gravel, sand, etc... I like the suggestion that mineral extraction has to be a certain distance from the house, just to be safe. Based on the steep topography of the land and difficult weather conditions at 11,000 ft., I seriously doubt it would be profitable to extract gravel at that location in my lifetime. I do see gravel pits at lower elevations about 15 miles away on large tracts of land (100 acres?) that have very flat topography.

I guess I could also ask how much it would cost to buy the mineral rights?

Some sellers will not accept any reasonable price for mineral rights because it's been drilled into them (pardon the pun) to never give those up. I think most of them have this fantasy that somehow, they're going to get an oil company to pay them a million dollars to put in a well on their property when in reality they might be lucky to get thousands or tens of thousands of dollars for those mineral rights in the best case scenario.

[Wolfpack Mustachian]

If there is no mining in the area (oil & gas, gravel, sand, etc.) the risk may be pretty low that the owner of the mineral rights will ever do anything with them. However, if they owns all the mineral rights in the surrounding area (as opposed to just this 10-20-acre parcel) the risk is higher.

Oil & gas companies want to work in large areas where they can buy or lease lots of mineral rights - not just a single isolated parcel.


I would certainly want a discount on the land - or some sort of agreement or deed restriction that no mineral extraction could occur within a certain distance from the house.

I don't think there is any oil and gas in the area. I think it's mostly gravel, sand, etc... I like the suggestion that mineral extraction has to be a certain distance from the house, just to be safe. Based on the steep topography of the land and difficult weather conditions at 11,000 ft., I seriously doubt it would be profitable to extract gravel at that location in my lifetime. I do see gravel pits at lower elevations about 15 miles away on large tracts of land (100 acres?) that have very flat topography.

I guess I could also ask how much it would cost to buy the mineral rights?

Some sellers will not accept any reasonable price for mineral rights because it's been drilled into them (pardon the pun) to never give those up. I think most of them have this fantasy that somehow, they're going to get an oil company to pay them a million dollars to put in a well on their property when in reality they might be lucky to get thousands or tens of thousands of dollars for those mineral rights in the best case scenario.

So bizarre...I've never heard of people holding out for mineral rights on the general principle of risking missing out on a "find." Wonder what they've been watching on TV or whatever to come to this conclusion.

[GilesMM]

If there is no mining in the area (oil & gas, gravel, sand, etc.) the risk may be pretty low that the owner of the mineral rights will ever do anything with them. However, if they owns all the mineral rights in the surrounding area (as opposed to just this 10-20-acre parcel) the risk is higher.

Oil & gas companies want to work in large areas where they can buy or lease lots of mineral rights - not just a single isolated parcel.


I would certainly want a discount on the land - or some sort of agreement or deed restriction that no mineral extraction could occur within a certain distance from the house.

I don't think there is any oil and gas in the area. I think it's mostly gravel, sand, etc... I like the suggestion that mineral extraction has to be a certain distance from the house, just to be safe. Based on the steep topography of the land and difficult weather conditions at 11,000 ft., I seriously doubt it would be profitable to extract gravel at that location in my lifetime. I do see gravel pits at lower elevations about 15 miles away on large tracts of land (100 acres?) that have very flat topography.

I guess I could also ask how much it would cost to buy the mineral rights?

Some sellers will not accept any reasonable price for mineral rights because it's been drilled into them (pardon the pun) to never give those up. I think most of them have this fantasy that somehow, they're going to get an oil company to pay them a million dollars to put in a well on their property when in reality they might be lucky to get thousands or tens of thousands of dollars for those mineral rights in the best case scenario.

So bizarre...I've never heard of people holding out for mineral rights on the general principle of risking missing out on a "find." Wonder what they've been watching on TV or whatever to come to this conclusion.

One of the largest oil fields in the world, the Permian of TX and NM, was not "discovered" until about 10 years ago.  Many landowners who had been told for 100 years there was no chance of a conventional oil or gas field for under their property struck it rich when when the fracking play emerged.

[Wolfpack Mustachian]

If there is no mining in the area (oil & gas, gravel, sand, etc.) the risk may be pretty low that the owner of the mineral rights will ever do anything with them. However, if they owns all the mineral rights in the surrounding area (as opposed to just this 10-20-acre parcel) the risk is higher.

Oil & gas companies want to work in large areas where they can buy or lease lots of mineral rights - not just a single isolated parcel.


I would certainly want a discount on the land - or some sort of agreement or deed restriction that no mineral extraction could occur within a certain distance from the house.

I don't think there is any oil and gas in the area. I think it's mostly gravel, sand, etc... I like the suggestion that mineral extraction has to be a certain distance from the house, just to be safe. Based on the steep topography of the land and difficult weather conditions at 11,000 ft., I seriously doubt it would be profitable to extract gravel at that location in my lifetime. I do see gravel pits at lower elevations about 15 miles away on large tracts of land (100 acres?) that have very flat topography.

I guess I could also ask how much it would cost to buy the mineral rights?

Some sellers will not accept any reasonable price for mineral rights because it's been drilled into them (pardon the pun) to never give those up. I think most of them have this fantasy that somehow, they're going to get an oil company to pay them a million dollars to put in a well on their property when in reality they might be lucky to get thousands or tens of thousands of dollars for those mineral rights in the best case scenario.

So bizarre...I've never heard of people holding out for mineral rights on the general principle of risking missing out on a "find." Wonder what they've been watching on TV or whatever to come to this conclusion.

One of the largest oil fields in the world, the Permian of TX and NM, was not "discovered" until about 10 years ago.  Many landowners who had been told for 100 years there was no chance of a conventional oil or gas field for under their property struck it rich when when the fracking play emerged.

Interesting. I hadn't thought about fracking.

It still has to be an incredible long shot, though, I would imagine? And I know it would be huge detriment to me if I was looking to buy. I mean if you're wanting to buy land for a house, who on earth would want someone pulling up stuff near your home, and if it's bought for the land/resources who wouldn't want all the resources.

[Michael in ABQ]

If there is no mining in the area (oil & gas, gravel, sand, etc.) the risk may be pretty low that the owner of the mineral rights will ever do anything with them. However, if they owns all the mineral rights in the surrounding area (as opposed to just this 10-20-acre parcel) the risk is higher.

Oil & gas companies want to work in large areas where they can buy or lease lots of mineral rights - not just a single isolated parcel.


I would certainly want a discount on the land - or some sort of agreement or deed restriction that no mineral extraction could occur within a certain distance from the house.

I don't think there is any oil and gas in the area. I think it's mostly gravel, sand, etc... I like the suggestion that mineral extraction has to be a certain distance from the house, just to be safe. Based on the steep topography of the land and difficult weather conditions at 11,000 ft., I seriously doubt it would be profitable to extract gravel at that location in my lifetime. I do see gravel pits at lower elevations about 15 miles away on large tracts of land (100 acres?) that have very flat topography.

I guess I could also ask how much it would cost to buy the mineral rights?

Some sellers will not accept any reasonable price for mineral rights because it's been drilled into them (pardon the pun) to never give those up. I think most of them have this fantasy that somehow, they're going to get an oil company to pay them a million dollars to put in a well on their property when in reality they might be lucky to get thousands or tens of thousands of dollars for those mineral rights in the best case scenario.

So bizarre...I've never heard of people holding out for mineral rights on the general principle of risking missing out on a "find." Wonder what they've been watching on TV or whatever to come to this conclusion.

One of the largest oil fields in the world, the Permian of TX and NM, was not "discovered" until about 10 years ago.  Many landowners who had been told for 100 years there was no chance of a conventional oil or gas field for under their property struck it rich when when the fracking play emerged.

Interesting. I hadn't thought about fracking.

It still has to be an incredible long shot, though, I would imagine? And I know it would be huge detriment to me if I was looking to buy. I mean if you're wanting to buy land for a house, who on earth would want someone pulling up stuff near your home, and if it's bought for the land/resources who wouldn't want all the resources.

In some areas you don't have an option. Think of a large subdivision that used to be a ranch owned by a single person. When they sold the land to a developer, the seller may have retained the mineral rights knowing that a typical suburban homeowner wouldn't notice or care. I remember some areas of Bakersfield, CA had pumpjacks intermixed with homes in a typical subdivision.

[roomtempmayo]

Based on the steep topography of the land and difficult weather conditions at 11,000 ft., I seriously doubt it would be profitable to extract gravel at that location in my lifetime.

My worry wouldn't be that someone would open a commercial gravel pit on your property, it would be that the seller stays in touch with an old buddy up the road who happens to own an excavator and wants a few yards of gravel every year to resurface a driveway or access road.  Seller tells his buddy he's welcome to go in and dig what he wants for some nominal fee.  Now you've got an amateur occasionally showing up to drive across your property without notice and dig up random spots. 

The potential for a low level annoyance seems real even if there's nothing on the property that's commercially viable.  There's a certain sort of dude who will make it his mission to get something out of these rights just because he can.

[sonofsven]

Based on the steep topography of the land and difficult weather conditions at 11,000 ft., I seriously doubt it would be profitable to extract gravel at that location in my lifetime.

My worry wouldn't be that someone would open a commercial gravel pit on your property, it would be that the seller stays in touch with an old buddy up the road who happens to own an excavator and wants a few yards of gravel every year to resurface a driveway or access road.  Seller tells his buddy he's welcome to go in and dig what he wants for some nominal fee.  Now you've got an amateur occasionally showing up to drive across your property without notice and dig up random spots. 

The potential for a low level annoyance seems real even if there's nothing on the property that's commercially viable.  There's a certain sort of dude who will make it his mission to get something out of these rights just because he can.

It wouldn't allow a gravel pit, or someone digging up sand or rock or gravel; that would be considered surface use.

This would be for something that is truly underground, like oil or natural gas.

The problem is that the owner of the mineral rights could set up equipment on the surface to test for and extract the underground resources, without your approval.

Around my neck of the woods there's no drilling of gas or oil (a couple miles thickness of hard basalt from ancient lava flows tends to discourage drilling).

However, there are underground caverns in the basalt that are used for natural gas storage in the nearby hills. The gas company buys low, fill the caverns, and sell high, similar to the strategic petroleum reserve.

One rumor I heard years ago: the gyppo logger that previously owned the hundreds or thousands of acres was in the hospital with dementia and an unscrupulous representative of the gas company got him to sign away the mineral rights to the land, which was worth much more than the trees on the land due to it's potential as gas storage, which they then developed.

His family swore he never would have signed off if he'd been in his "right mind", they tried to sue and lost.

So now, when old timers around here sell off their hundreds of acres (after it's been logged, of course) many stipulate that they will retain the mineral rights, because "won't get fooled again!".

[Askel]

I live in a (mostly) former mining district, it's extremely rare to get mineral rights for any property you buy around here.  Surface rights and mineral rights went their separate ways years ago.   

I've yet to find an active mining operation on my land. :D   

But yeah, as was pointed out mineral rights do not give you surface rights.  Occasionally there are some mining efforts started around here. People who give up their surface rights to the mining operations are usually paid handsomely. Sure, maybe you might have mine tunnel 1000ft below you, but our downtown and surrounding areas are already crisscrossed with tunnels. 

[Wintergreen78]

Severing surface rights and mineral rights is fairly common in the western US.

Look up Colorado-specific laws related to mineral rights to be sure you understand the potential impacts. I’ve seen articles about situations in Colorado where people bought their rural property and ended up with oil wells out their front door. The general impression I got was that mineral rights holders were treated favorably in Colorado.

Often they have to compensate the surface rights holder for access, but the surface rights holder has to allow it. Often surface rights holders can only charge reasonable rates for allowing access and set reasonable restriction on access. You can’t throw up roadblocks to prevent someone from exercising their mineral rights. My understanding is that the specific requirements and case law vary by state.

Of course, for any particular property the mineral rights may never be exercised, but the worst-case scenario could really suck if you are attracted to a property for the views or seclusion.

[ChpBstrd]

I imagine this is not a problem if the lot is small. Like, less than an acre.

Which raises the question - why do you need 20 acres to vacation on? Would a one-acre lot support the same vacation cabin without requiring as much money to be sunk into it, or are you building a massive dirt bike track?

[sonofsven]

I imagine this is not a problem if the lot is small. Like, less than an acre.

Which raises the question - why do you need 20 acres to vacation on? Would a one-acre lot support the same vacation cabin without requiring as much money to be sunk into it, or are you building a massive dirt bike track?

It's often the case that, because of ag/forest zoning, one needs a very large acreage in order to build a cabin.

[Chris Pascale]

I wonder how much push back you'd get if you just said no.

I'd take that approach and move on from there.

[clarkfan1979]

I wonder how much push back you'd get if you just said no.

I'd take that approach and move on from there.

It's a second home in a prime location with a little over 20 acres. It's in my price range because the house needs work. The property got multiple offers within a couple days. I don't think saying, "no" is an option for any of the people wishing to buy it.