Minerals can refer to oil, gas, coal, metal ores, stones, sands, or salts.
This can occur from prior ownership of mineral rights or is commonly performed when land is passed between family generations.
Today corporations own a significant portion of mineral rights beneath private individuals.
[5] This was a crucial step in the development of an economic system based largely on private incentives and market transactions.
[6] An early case involving a property dispute between a father and son involving ownership of coal veins in Pennsylvania is cited stating; “One who has the exclusive right to mine coal upon a tract of land has the right of possession even as against the owner of the soil, so far as it is necessary to carry on mining operations.” (Turner v. Reynolds, 1854).
[7] This is becoming ever more present in the light of recent unconventional oil and gas development (UOGD) made feasible by technological advancement such as hydraulic fracturing.
[5] Problems include water pollution, fluid storage issues and surface damages.
[8] Such claims typically are protected by various states' oil and gas regulatory agencies whose broader mandate is to promote conservation and minimize conflicts between mineral owners.
This arrangement between individual mineral owners and oil companies began prior to 1900[clarification needed] and still thrives today.
Although there are numerous other important details, the basic structure of the lease is straightforward: in exchange for an up-front lease bonus payment, plus a royalty percentage of the value of any production, the mineral owner grants the oil company the right to drill for a period of time, known as the primary term.
This enters into the period of time known as the secondary term, which applies for as long as oil and gas is produced in paying quantities.
An oil and gas lease is a contract because it contains consideration, consent, legal tangible items and competency.
Royalty statements include the production and revenue figures for both the individual owner and the entire well.
Additionally, royalties may cease altogether if the associated wells quit producing marketable quantities of oil or gas, if the operating company has changed hands and the new operator has not yet established a new payment account for the owner, or if the operating company or product purchaser is missing appropriate paperwork or proper documentation of changes in ownership or contact information.
However, companies will often enter into voluntary negotiations with the surface rights owner to ensure that the operations all go smoothly.
In such cases, the company will offer a SUA, in which property owners may ask for financial compensation or other concessions regarding how the minerals are extracted.