Minerals: Overview

A fee simple estate in land includes title to both the surface estate and the mineral estate. The mineral estate (either the entire estate or lesser interests or rights in the mineral estate) can be severed from the remainder of the land. The severance of minerals can be accomplished in several ways, such as an exception or reservation in a deed, a deed of the surface only, a deed of minerals or mineral rights, a mineral lease, or a mortgage of the mineral estate only. 


Minerals can be conveyed, encumbered, and leased, just like any other interest in land. Generally, the owner of the mineral estate has the right to use the surface, including the right of ingress and egress, for purposes of exploration, drilling, mining, and otherwise extracting the minerals


An exception on Schedule B must be made for every document containing a grant, a reservation, or a lease of a mineral right or interest (unless only the surface estate is being insured, as discussed below). In most states, once a mineral interest is shown as an exception to title, it is not necessary to show subsequent transfers of such interest. 


If only the surface estate is being insured, an exception for all minerals, as set forth in the underwriting guidelines, should be made. When a complete exclusion has been made as to all minerals, it is not necessary to also list specific exceptions to mineral reservations, grants, or leases. 


Mineral leases may have either a fixed term or an indefinite term. When the term is indefinite, it is typically a short fixed period followed by a period that continues so long as minerals are produced. If a fixed-term lease has expired by its terms, it need not be excepted to. It is much more difficult to determine if an indefinite-term lease has expired because production has ceased. Because of the risk involved in such a determination, require either a written release of the lease, executed by the lessee, or a judicial determination that the lease has terminated. In some states, an Affidavit of Nonproduction from the landowner and two disinterested parties may be used to prove up that the lease has terminated. 


In some jurisdictions, affirmative coverage is available to insure the owner or lender of the surface estate against loss or damage caused by drilling or mining operations by the owner of the mineral estate. In most jurisdictions, the affirmative coverage is provided by way of a mineral endorsement. The underwriting guidelines below must be complied with before giving any type of affirmative coverage. 


Because of the extraordinary risk involved in insuring a mineral estate separate and apart from the ownership of the land, Agents National Title will not insure just a mineral estate (or any other mineral interest or right).