Buying land is considered a safe move, but you might be seriously restricted on your own land if you exclude the mineral rights.
Not knowing what a land transfer deal entails is the number one reason buyers are dissatisfied or feel like they have been taken advantage of. And no deal will make you feel this way, like buying surface rights without knowing the weight of mineral rights.
Buying land without mineral rights in Texas means the mineral owner has the right to drill on your land without consent. You can use groundwater by digging a well to a certain depth. But if the mineral owner's actions damage your water reserve or surface property, you might not get compensated.
In this article, we will go over each and everything you need to know about being a surface rights owner in Texas. Among other things, you will learn why mineral owners have so much leverage and legal protection and what you can do to avoid disputes. But first, we need to go over who needs to buy surface rights.
You should buy surface rights when a well-established oil or mineral extraction operation is already set up on a plot. This means the mineral owner is already maximizing the extraction and knows how much surface land needs to remain untouched. Anything you build on such a surface is mostly clear of disputes. But before you find yourself in a dispute, you need to know about the following three categories.
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Mineral Rights, Surface Rights, and Sub-Surface Rights: A Primer
Before you understand the utility (or lack of utility) of mineral rights, you need to know about all the options in a land transfer transaction. Someone who has complete ownership of land has a claim over everything under the land's surface as well as over it.
This, by default, includes mineral rights as well as water rights. The same individual can sell different sets of rights to different people, handicapping each buyer to sell exclusively the access and rights they own.
You must care about this because it can save you a lot of time and energy. If you are buying land from someone who has surface rights only, any time you spend convincing them to sell you mineral rights is wasted. Similarly, an individual who controls the mineral rights of a property cannot sell you the surface plot except the extraction area that he might own.
It is also crucial to know about the water laws of the state in which you buy land. This can help you decide the worthiness of sub-surface rights. For example, if you can legally dig for water on land despite having only surface rights, it would be redundant to get mineral or subsurface rights unless you are looking to mine for underground resources.
What Are Texas Water Laws?
Texas water laws dictate that surface water belongs to the state while underground water is governed by the right of capture and belongs to the landowners. The owner can use any body of water on a private property's surface without state-backed litigation. Surface rights owners have access and permission to use groundwater.
Unlike surface water, groundwater is under the land surface but can be reached by digging a well or boring at sub-surface depth. Going any deeper than a set limit can land you in conflict with the surface rights owners. The judicial system has yet to clearly lean one way or the other. For the most part, mineral rights owners do not meddle in the water usage of surface rights owners.
Can Texas Mineral Rights Owners Occupy Surface Land?
According to a literature review of the Texas Laws, it is evident that mineral rights owners can use surface land as per their requirements. As long as they can prove to the court that they are occupying the minimum viable space to explore and extract the underground minerals or oil, they can use the surface land without the surface rights owner's consent.
The law seems to be skewed in favor of companies that own the mineral rights to vast plots of Texas land because the same companies lobby to get the laws written in their favor. While future court verdicts might set a precedent that is antithetical to the current norms, you cannot buy land, counting on the laws to swing in your favor.
Can Mineral Rights Owners Demolish My Property?
Alarmists who have a vested interest in changing the status quo of texas land rights often allude to the technical possibility of a mineral rights owner getting a surface owner's property demolished.
There have been zero cases of a surface rights owner demolishing a pre-built surface property, but there have been instances where the surface-level activity of the mineral owners damaged the existing fixtures.
According to a law professor's lecture research at Texas A&M, the mineral owner:
- Does not need the surface owner's permission to access or use the land.
- Need not get consent to modify the surface for extraction purposes.
- Doesn't have to compensate the surface owner for damages to the surface incurred during the extraction process.
- Is liable only if he exceeds the necessary modifications or is provably negligent in preserving the surface.
In other words, the mineral owner cannot demolish your property if you leave enough room on the surface to facilitate the extraction. Suppose you occupy 100% of the surface you own with a giant building. In that case, the mineral owner has the right to set up an extraction operation inside the building or approach the court to get the property demolished.
How to Avoid Land Rights Dispute Issues in Texas?
To avoid ownership rights issues, you must consult a property lawyer and research the mineral owner of the surface you plan to acquire. Generally, the bigger the mineral owner, the less legally vulnerable it is.
If a mineral owner has a reputation for being litigious or taking liberties with the surface, you should stay away from the deal. In case you have already bought the land, you can draw up a new agreement where the mineral owner decides to confine his surface operations to a specific area. The mineral owner doesn't need to sign any such document or even sit at the table. However, larger corporations tend to send in-house legal counsel to handle such tasks.
This is what sets the bigger mineral rights owners apart from private owners. While large corporations and holding entities are less vulnerable to legal action, they're less interested in causing drama. Usually, they have standardized processes to make sure all stakeholders are reasonably satisfied. Private individuals who get mineral rights are not as understanding. They might overreach, refuse to talk, and be difficult in general. But they can be sued more easily.
It is also worth considering that once the land is depleted of its minerals and resources, the mineral-owning corporation might sell off the sub-surface rights to you for a fraction of the price. But private individuals and novices don't understand how extraction can result in diminishing returns and try to seek different drilling sites within the same plot.
This can be inconvenient if you have already raised structures on your property. Most property acquisition literature warns against buying surface rights if one plans to build on a plot. This is because property can incur wear and tear during the extraction process.
Can Mineral Rights Be Split?
Aside from having multiple usage rights, each type of usage right can have multiple owners. Just like there can be multiple stakeholders in a surface plot, there can be multiple owners of the mineral rights.
Getting surface rights to land as a co-owner can be cheaper twice over. Firstly, the surface exclusivity brings down the price of a plot. Then, having someone else pitch in can further fractionate the value of the investment. This makes 'buying land' more affordable.
The drawback of being a co-owner in surface or mineral ownership is that you have at least two other parties to manage. This is not ideal for people who don't have a knack for people skills and negotiation. If you become the sole owner of surface or mineral rights, you don't need to fight the same battle twice. But of course, being free of co-owners comes at a price.
Can I Buy Mineral Rights to the Surface I Own?
It is possible to buy or lease mineral rights to the land you own. It is also possible for the mineral owner to lease the rights to another party. Generally, leasing mineral rights is a good strategy because the extractor is not left holding the property after its resources have been depleted.
Does Land Become Worthless Without Mineral Rights?
Land becomes worthless when mineral rights are excluded, but it doesn't become worthless. The utility of the surface is what drives the price of the surface value. While the mineral rights are worth more in states like Texas, they can ultimately have diminishing returns compared to surface rights.
It can be theorized that, down the line, mineral rights would ultimately be sold back to the surface owners once they are not useful to extractors. But it might take generations for this to happen.
Should You Get Land With or Without Mineral Rights?
If the land is seller-financed, you can get it with mineral rights and lease these rights to pay off the land acquisition. However, most of the mineral-rich land in Texas is already spoken for, with only surface plots available for sale. Depending on your buying intent, you can proceed with the purchase of surface rights. But before you do so, you need to do your due diligence.
Due diligence is required before buying land without mineral rights in Texas:
- Legal consultation - You first need a relevant legal opinion on the specific deal.
- Mineral owner's track record - Next, you need to be sure the mineral owner has abused his surface rights before.
- The predominant natural resource - It is also helpful to know what is to be extracted from the land. Solids like gold require digging in various areas, while gas and oil can be extracted from a small space in one corner of the plot.
- Extraction methods and pre-existing workspace - Knowing how the resources underneath will be extracted will help you project how the extraction will affect your groundwater. If there is a pre-existing extraction framework, the deal is more predictable.
- Usage-specific expert's opinion - Finally, you need to get the opinion of the relevant expert. If you want to grow a crop, get a farmer's opinion. If you want to build a plaza, get a developer's opinion.
Buying land without mineral rights has its pro (low price) and a multitude of cons. Given the state of mineral rights consolidation in Texas, you might have to look harder to find land with mineral rights intact. Still, if it is affordable and accessible, it is best to buy the land and lease mineral rights than to buy surface rights only.
About THE AUTHOR
Brittany has been in the land business since 2020 when the world was starting to shut down. Since then, we’ve sold to dozens of people from ATV weekend warriors to camping enthusiasts to retired truck drivers. Our inventory spans mostly in the western United States. We’ve been trained by experience, land acquisition courses, and hundreds of hours meeting with county assessors and clerks, zoning officials, realtors, and land investors. We’ve answered hundreds of questions from people regarding the buying and use of land.Read More About Brittany Melling