Surface vs. Mineral Rights in Oklahoma: Important Considerations for Landowners
In Oklahoma, there are two major categories of land rights: surface rights and mineral rights. Surface rights are rights attached to the surface of the land. With surface rights, you have access to and the ability to build or otherwise use the surface of the land. Mineral rights are sub-surface rights. If you own minerals, you have the right to explore and develop those minerals or sell or lease them out to companies or individuals.
When you buy or inherit a piece of land, you’re not always guaranteed both surface and mineral rights. A unified estate is where the same party owns the surface rights and the mineral rights. A split estate is when the mineral rights have been severed from the surface rights and have different owners. Most of the time, the mineral rights have been severed from the surface rights of a tract of land. A fractional estate is when the mineral rights have been split among multiple owners. It’s essential to know the history of your land and if the surface and mineral rights have been severed because it will affect the rights you have over the use of your land.
Mineral Rights
There are a lot of acronyms, abbreviations, and possibly unfamiliar language associated with mineral rights, some with overlapping meanings. These need to be defined if you want to understand what you own and what that means for your ability to profit from your property. A mineral interest is an interest created after severing the minerals from the surface estate. Owners of mineral interests have executive rights to enter into leases or to drill or develop the minerals they own. These executive rights include the right to reasonable surface use. You will most likely want to retain these executive rights unless you intend to sell the entirety of your mineral interests. There are different types of mineral interests, such as Non-Executive Mineral Interest (NEMI), which allows you to receive bonus payments and royalties associated with the land but does not allow you to convey (lease or sell) the land. There is also what is known as term mineral interest, which is a mineral interest that is granted or reserved for a set period of time.
Different from a mineral interest is a royalty interest. A royalty interest is an interest that allows the owner to receive a share of the production income after the sale of oil, gas, or other minerals free from the cost of that production but does not allow the owner to produce or process the minerals themself or lease the mineral interest. Like mineral interests, there are different kinds of royalty interests. A Non-Participating Royalty Interest (NPRI) is expense-free, does not share in the bonus or rentals from a lease, and does not have executive rights, just the ability to collect royalty payments. An Overriding Royalty Interest (ORRI) is a royalty interest bound to a specific lease or leases. ORRIs are sometimes granted by oil and gas companies to investors, landmen, geologists, or others as compensation for their service in moving production along. With an ORRI, the value is determined after other royalty interest owners have been paid, meaning that the interest an ORRI owner receives comes from a smaller portion of the revenue than NPRI owners’ interest. If a well stops producing or a lease ends, NPRI owners still have rights to royalties; they just won’t receive revenue until a new lease is in place and production begins again. However, ORRI owners’ interests are tied to that specific lease, and their royalty payments end when the lease ends.
Surface Rights
If you own only surface rights, you may be surprised that mineral owners are granted surface use; however, surface owners have rights too. Typically, the surface owner retains all rights for negotiating and profiting from pipeline installation. Further, mineral owners only have the right to “reasonable” use of the surface; that is, they are limited to the use of just the surface area necessary to drill or process minerals. In Oklahoma, oil and gas companies are required by law under Title 52 of the Oklahoma Statutes to enter into Surface Use Agreements with surface owners. This process is governed by the Oklahoma Corporation Commission. “Prior to entering the site with heavy equipment, the operator shall negotiate with the surface owner for the payment of any damages which may be caused by the drilling operation.” 52 O.S. § 318.5(A). If an agreement is reached, the company can start drilling. If a deal can’t be reached, appraisers will be appointed to determine the damages the surface owner may face and the compensation they are entitled to before the drilling can begin. This protects surface owners from extensive damages, as the oil and gas companies are required to compensate the owner for such damages. Treble damages can also be awarded if a company knowingly and willingly drills without notifying or reaching an agreement with the surface owner.
Protect Your Rights
While it’s essential to understand what kind of interests or ownership you have, it’s also important to keep your contact information up to date as a mineral owner. Oklahoma does not require that state agencies keep current records of all mineral owners. These records could be out of date for all kinds of reasons. As generations pass and land is inherited, the mineral deed could still reflect a deceased person’s ownership. Maybe the mineral owner moved, and the only address on file is from years ago. You can register on the Oklahoma Mineral Owner Registry to keep your information updated, or you can make sure your current address is on file in the county clerk records in the county where your mineral rights are located. Updating your information is important to do because the state of Oklahoma can lease out your mineral rights to keep production going if oil and gas companies cannot contact you. In that situation, you won’t receive any revenue or royalties that you’d otherwise enjoy.
If you’re planning to buy or sell land, recently inherited mineral rights, or are looking to enter into a lease with an oil and gas company, you should contact an attorney experienced in oil and gas law. Oil and gas contracts and title opinions are among our core focuses at Plainview Legal Group. Our team can help you understand and negotiate a lease or surface use agreement, guide you through a probate, affidavit of heirship, or quiet title action to transfer ownership of minerals, or represent you in a boundary dispute over land. If you have questions or are going through a conflict related to your land rights, call us at (405) 310-0183, or schedule a free consultation through our website.
