Surface rights vs mineral rights is a relatively straightforward concept on, shall we say, the surface, with the former referring to ownership use on top of the land. If you can walk on it, touch it, till it, or water it, it’s ground that most likely falls under the surface rights category. Dig a little deeper, and you’ll soon have to address mineral rights, which refer to ownership of the subsurface resources, such as oil, gas, minerals, or coal, for example.
For rural land owners, understanding the difference between surface rights vs mineral rights is extremely important. When you buy the surface rights to land, you don’t automatically have access or rights to everything subsurface.
Mineral rights can be extremely valuable. If someone else owns mineral rights on land you own or are considering buying, they might be able to access your land for exploration and extraction.
Surface rights and mineral rights frequently call into question environmental and community concerns, especially if they result in mining, drilling, or land disputes. And then there’s the separation of titles for surface and mineral ownership, which is important to understand before buying or selling land.
Let’s take a closer look at the difference between surface rights and mineral rights and what they can mean to current land owners and those looking to buy property in the surface rights real estate market.
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Why Is It Important To Understand The Difference Between Surface Rights vs Mineral Rights?
In short, owning land doesn’t always mean you own everything above and below it. This is why it’s imperative to understand the difference between surface rights vs mineral rights. They determine what you truly own, how you can use your land, and who has the potential to profit from the resources beneath the surface. Understanding how these two sets of land ownership rights and access differ can affect the following:
- Property value and income
- Land use and lifestyle
- Real estate and legal transactions
- Environmental and community interests
Here are scenarios of how not fully understanding surface rights, subsurface rights, and mineral rights, and how they interact, can result in serious problems for the landowner.
1. Unexpected Drilling Or Mining on Your Property
It’s the dream scenario—you’ve purchased the rural acreage you’ve long dreamt about. You and your family have relocated to enjoy the wilder side of life, quieter days, and fewer people. Then, the mining company shows up with subsurface rights you, as the surface rights owner, didn’t know they had because the mineral rights were sold decades earlier by a previous owner.
In this instance, the mining company has legal access to parts of the property for drilling operations. Gone are those quiet, carefree nights. And even more significantly, the mining company might not be required to compensate you as the surface rights owner for their mineral rights on your land when they mine the subsurface.
Failing to verify mineral ownership can lead to unwanted industrial activity on your property, tearing up acreage with heavy machinery, large drilling crews, and constant noise. The unfortunate fact is, you might not have any legal power to stop it.
2. Lost Financial Opportunity
When you purchase land, it’s just as important to understand the resources it provides as it is to know where the property boundaries are and what the soil quality is. If you sell your land without realizing it contains valuable natural gas deposits or oil, and the mineral rights automatically transfer with the surface rights, you might be walking away from future profits or royalties. Understand your mineral rights as a land owner, and know when to separate or reserve them if you’re looking to sell the property.
3. Legal Disputes And Title Problems
Not understanding what you own and what you don’t when buying land that has both surface and mineral rights can result in unforeseen costs down the road. Let’s say you buy some beautiful, tillable ground for farming. After closing, you learn the mineral rights are owned by another party who now wants to enter the property to mine gravel or drill a well.
Assuming you don’t want them there, this type of situation can result in costly legal disputes over access and land use, as well as a potential drop in property value due to the uncertainty and disturbance risks.
In short, not knowing the difference between surface rights vs mineral rights when it comes to your land can mean loss of control, loss of income, and possible legal or financial disputes you’d probably rather avoid.
Surface Rights vs Mineral Rights – What’s Included In Each?
Thinking of the ground surface as the delineating plane between surface rights vs mineral rights, it’s easy to simplify what each includes into two categories: above ground and the subsurface.
Surface rights include the following:
- Land surface area, including soil, grass, crops, and trees/timber
- Buildings and structures, such as homes, barns, fences, and roads
- Farming and ranching activities and enterprises
- Water rights for surface water, although this is state-specific, so talk with your real estate agent about how this applies to your land
- Land use rights, such as residential, agricultural, or recreational end uses
Surface rights do not include the extraction of underground resources, nor do they include the right to stop someone with mineral rights from accessing the subsurface.
Mineral rights address the legal authority to explore for, extract, or sell the natural resources found below the surface.
Mineral rights include the following:
- Ownership of subsurface resources, such as oil and natural gas, coal, metals and ores, and other minerals like salt, limestone, or gravel
- The right to lease or sell mineral rights to third parties (think energy or utility companies)
- The right to receive royalties from production or extraction
- Access to the surface to get to the resources beneath it, subject to surface damage regulations
Mineral rights do not encompass ownership or use of the surface for purposes unrelated to exploration or extraction. The energy company cannot build a home or a base on the land from which to operate, for example. Mineral rights also do not include the right to interfere with the surface owner’s lawful use of the property.
So, how far down do surface rights go? It’s a common question, with a general-rule answer: you own to the depth required to reasonably use and enjoy your land. This includes the soil, sand, and rock directly beneath your property that supports things like home construction and landscaping, gardening and farming.
Additionally, that depth extends to include common and necessary infrastructure, such as basements, septic systems, wells, and a foundation. Below that, rights and ownership can shift to mineral rights holders or the state, in the case of groundwater or geothermal energy.
Which Type Of Land Right Is More Valuable: Surface Rights Or Mineral Rights?
Depending on the land’s location, potential uses, and the presence of valuable resources, mineral rights are typically more valuable. This is because owners can sell, lease, or extract the resources. They can also earn royalties from the production for decades. In energy-rich regions like Texas and North Dakota, a single well can generate millions in revenue over its lifetime.
For this reason, it’s important to know what kind of resources your land covers. Walk onto the surface of a barren 50-acre plot in West Texas, and you might assume it’s worthless, but if there’s quality oil subsurface, the mineral rights could far outweigh the surface land price. Conversely, if there aren’t any valuable resources or minerals beneath the surface, mineral rights are worth little.
Surface rights tend to carry more value in daily use. Land used for residential development, farming, recreation, or business typically provides more steady, long-term value even if no minerals are present.
There is also the opportunity to develop or sell the land. Some scenic Front Range property might have limited subsurface minerals, but its value on the surface for housing, farming, or tourism can reach hundreds of thousands of dollars per acre, making it highly desirable in the surface rights real estate market.
Do Mineral Rights Supersede Surface Rights?
In general, yes, mineral rights do supersede surface rights. However, mineral rights often come with important limits and legal protections for surface owners. In the legal hierarchy of surface rights vs mineral rights—when the two are owned by different parties (a split estate)—mineral rights are considered dominant.
This means the mineral rights owner has the legal right to access the surface to explore, drill or mine their minerals subsurface, and the surface owner cannot prevent reasonable access to do so. This right does come with a caveat—the mineral owner must exercise their rights within “reasonable use,” without unnecessary damage or interference to the surface land.
So, what does “reasonable use” really mean? Although mineral rights are dominant, they are not unlimited. The mineral owner:
- Can only use as much of the surface as is reasonably necessary to extract resources
- Must comply with environmental regulations and mitigate any surface damage
- Some states require compensation for:
- Lost crops or grazing land
- Damaged roads or water sources
- Other disruptions to normal land use
We highly recommend consulting with your attorney or real estate agent to confirm what type of compensation rights you may have as the surface rights owner.
In What Scenarios Would Someone Want To Purchase Both Surface Rights And Mineral Rights?
Purchasing both surface and mineral rights gives you complete ownership and control of all aspects of the land while maximizing its profit potential. To this end, there are a number of different reasons a land owner, or land ownership group, might want to consider securing both the surface rights and the mineral rights to a specific plot of land.
- Maximizing long-term investment value – Owning all facets of large-acreage real estate means you can determine whether or not to develop the surface of the land and if you want to lease or sell subsurface mineral rights for royalties.
- Avoiding conflicts or surface disruption – Mitigating the risk of having to interact with an energy company or contractor, or avoiding the harm they can potentially do to your land, is a good reason to secure the mineral rights and the surface rights.
- Generating passive income from multiple sources – Land owners who capitalize on everything on the surface and subsurface can diversify their uses to help generate income and appreciate the land’s value. These uses can include leasing the surface for things like agriculture, solar farms, and grazing, and leasing or selling the mineral rights for oil, gas, or other mineral extraction.
- Controlling for environmental factors and stewardship of the land – When you own both sets of rights, you can choose to prohibit mining or drilling, preserving the land and strengthening ecosystems for generations.
- Simplifying estate and legal management – Landowners who lay claim to both surface rights and mineral rights find it easier to sell the land, transfer its ownership, or pass it on through inheritance. A split estate can complicate the buying and selling of land.
In What Scenarios Would Someone Want To Purchase Only Surface Rights Or Only Mineral Rights?
Again, this comes down to the ultimate end use of the land, its legacy and the owner’s desire to profit from it. Why would someone want to purchase only surface rights? Here are a few scenarios that often arise in surface rights real estate:
- Residential or recreational use – This is the most common reason. Your goal with the land is to live on it, hunt on it, farm it, play on it or otherwise secure it for future generations.
- Agriculture or commercial development – The surface of the land and the soil just beneath it are obviously of value to those looking to farm or ranch on the property. In this case, mineral rights simply aren’t needed.
- Lower purchase cost – In the end, it might come down to the bottom line, and a buyer wanting to own the land but not being able to afford full ownership of both surface and subsurface mineral rights.
Alternatively, why would a seller choose to retain mineral rights, or a buyer want to purchase only the mineral rights associated with the land?
- Income potential – Investment or royalty income without having to own the actual property.
- Speculative or long-term holdings – This is more for investors who are anticipating resource values to rise.
- Strategic control – For energy and mining companies, much of their profit is born from securing future extraction zones to ensure exclusive access to subsurface resources.
When Does It Become Necessary To Draw Up A Surface Use Agreement (SUA)
To start, a surface use agreement (SUA) is a legal contract between the surface rights owner (typically the land owner) and the mineral rights owner or energy company (the party or group developing or extracting underground resources).
Knowing when to draw up an SUA can help prevent conflicts and unwanted expenses between landowners and resource developers requiring access to the subsurface. The most common reason for establishing an SUA is when the surface rights vs the mineral rights are owned separately (split estate). The landowner will want to have an SUA in place before any drilling, mining or resource extraction begins to ensure all conditions are met, respected, and maintained.
If it’s time to sell property, an SUA will be necessary to clarify ongoing rights for future land owners, subsurface resource developers, and energy companies. Several U.S. states actually require SUAs in certain conditions, especially in areas rich in energy or resource production. Finally, there’s the benefit of proactively protecting your property with an SUA.
What Happens If All Parties Cannot Come To An Agreement?
This is where things can get tricky, and why it’s so critical to establish an SUA before any mineral extraction takes place. Of course, this isn’t always the case.
Mineral rights can go back generations. Land owners can change their minds about use and access. If the parties can’t agree, the outcome essentially depends on three factors: who owns what, state law, and how the mineral rights were originally granted.
Remember, in most U.S. states, mineral rights are legally dominant, meaning they take precedence over surface rights. But the “reasonable use” rule must still apply—those extracting resources can only use the surface land as much as is reasonably necessary to get the job done.
If there are still conflicts, state laws might require mediation or compensation. These regulations are very state-dependent, so talk with your local DNRC, recreational real estate agent, or other local or state authorities about the surface and mineral rights laws in your area.
What You Should Negotiate For In An SUA
A surface use agreement typically includes the following:
- Access & Entry: Where and how the company with subsurface rights can enter the property
- Location of Operations: Defines exact locations on the land for wells, tanks, and other structures
- Compensation & Damages: Outlines payment for land use, crop loss, damages or other reductions in property value
- Water Use: Protects existing water wells or irrigation systems and sets limits on water usage
- Noise, Dust, and Light Control: Establishes standards to minimize disturbances
- Reclamation & Restoration: This provision requires the extraction or energy company to restore the land after drilling or mining
- Duration & Renewal Terms
- Liability & Insurance
Work with local legal counsel and a seasoned real estate agent who understands the intricacies of mineral rights as they relate to your land purchase, or vice versa.
How to Verify Whether The Property You’re Considering Comes With Surface Rights, Mineral Rights, Or Both
If the complexities and intricacies of owning, purchasing, selling, or leasing land with mineral rights are overwhelming or confusing, you’re not alone. This type of land purchase or sale is best done with a recreational or large-acreage real estate agent who understands what to look for, what questions to ask, and how to protect your interests in the process.
Make sure whoever you’re working with is licensed in the state where the land purchase or sale will take place, and that they have experience with and understanding of surface rights vs mineral rights.
You Don’t Have To Navigate The Land Purchase Process Alone
Whether you’re looking for an investment opportunity, a family legacy property with profit potential, or an opportunity to steward and protect a plot of land into the future, understanding how mineral rights vs surface rights affect your decision is important. Fortunately, you’re not alone.
The recreational real estate professionals at Hayden Outdoors know big land. We’ve dealt with buyers, sellers, energy companies, and local agencies working to secure our clients the best real estate opportunities possible.
Connecting people with the perfect property is Hayden Outdoors’ specialty. Don’t hesitate to give us a call or get in touch with our real estate agents; we’re happy to talk quality ground (whether involving surface rights or mineral rights) all day long.
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