Kansas Geological Survey, Public Information Circular (PIC) 19
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Mineral Rights and Leases

An increasing level of interest in coalbed methane has spurred activity in eastern Kansas. Local landowners may benefit economically if they own the mineral rights beneath their property. Mineral rights are defined as the right of ownership of the mineral resources that underlie a tract of land.

Both the land surface and the resources below the surface can be owned and are considered property. The mineral rights can be owned in total or can be owned by the specific mineral commodity; for example, one company can own the mineral rights to the coal, while another company owns the oil and gas rights. Coalbed methane is natural gas and is considered part of the oil and gas minerals.

The owner of the mineral rights can be different than the surface owner. In Kansas, the landowner usually owns the subsurface rights, but sometimes these rights have been severed, or separated from the surface ownership. Severance of mineral rights occurs when the owner of both the surface and mineral rights sells or grants by deed the mineral rights underlying their property. The landowner may also reserve, or retain, all or a portion of the mineral rights upon sale of the property. Mineral deeds and mineral reservations are recorded with the county register of deeds and are included in any abstract of title to the land involved.

Mineral owners have the right to access and develop their minerals. Landowner rights are preserved, whether or not they participate in development of the mineral rights. Regulations are in place to stop operators if their activities are irresponsible or damaging to the surface. Landowners are entitled to compensation for loss of use or damage to their land. Most operators are willing to work with the landowner to reach a fair settlement for damages, but if this fails, state and federal regulations protect the landowner.

Before companies can begin an exploration and development program, they must obtain a lease to the mineral rights (in the case of coalbed methane, an oil and gas lease). An oil and gas lease is a legal agreement between the mineral-rights owner (the lessor) and the oil and gas operator (the lessee) that grants the operator the right to explore and develop the oil and gas resources which may underlie the area described in the lease. Some general stipulations that are usually part of a lease agreement are lisited below:

• A legal description of the area and the number of acres.
• The primary term of the lease. This can be for any period of time, but is usually five or ten years.
• A provision for lease rental payments (usually annual) by the operator to the mineral-rights owner. Rental payments maintain the lease in effect throughout the primary term. If oil or gas is found, the lease will remain in effect as long as production continues, even beyond the primary term of the lease.
• A royalty clause that stipulates the mineral-rights owner's share of the oil or gas production. The royalty may be any amount mutually agreed to by the operator and the mineral rights owner, but is usually one-eighth (12.5 percent) of the oil or gas produced from the lease. Usually the operator sells the oil or gas to a refiner and the mineral-rights owners receive payment for their share from the operator.

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Kansas Geological Survey, Geology Extension
1930 Constant Ave., Lawrence, KS 66047-3726
Phone: (785) 864-3965, Fax: (785) 864-5317
bsawin@kgs.ku.edu
Web version November 2001
http://www.kgs.ku.edu/Publications/pic19/pic19_2.html