by Adam Ferrari, CEO of Phoenix Energy
In many real estate transactions, the focus is only on surface value, whereby real estate investors are focused on location, zoning, and development potential. But just beneath the surface is an often-overlooked asset class with the potential to impact a property’s value: mineral rights. Mineral rights are one part of the deal that many buyers simply skip over when they look at a property.
Mineral rights are “the ownership rights to underground resources such as fossil fuels (oil, natural gas, coal, etc.), metals and ores, and mineable rocks such as limestone and salt.” Mineral rights are distinct from the land’s surface use, and it’s important to note that mineral rights can be sold or leased independently from the surface rights to the land above them. In effect, a single parcel of land can be monetized twice: once for the surface rights and once for the right to extract the resources beneath it.
Most real estate agents’ expertise lies with zoning or location, and they miss what’s happening underground. Mineral rights can make things complicated, but they can also create opportunities for income if handled correctly.
The hidden value of mineral ownership
Mineral rights can quietly, and in some cases significantly, influence the value of a property. When a landowner keeps those rights, they might earn income through royalties or leases if oil, gas, or other minerals are extracted beneath their land. In energy-producing regions like North Dakota’s Williston Basin, that potential can, in certain circumstances, support higher pricing than comparable surface-only parcels
On the other hand, if those subsurface rights have already been sold, buyers may discount the property since the surface owner can’t control future drilling or infrastructure projects. And even when mineral and surface ownership remain together, any exploration activity can restrict how the surface is used, whether for farming, building, or development.
In short, mineral rights can add remarkable value or real complications depending on who holds them and how they’re managed.
Buying mineral rights: What to know first
For buyers of mineral rights, due diligence is crucial. Below are three guidelines that every buyer should know:
1. Verify ownership.
Mineral rights can be severed and sold decades earlier, often leaving property owners unsure of their status. Buyers should commission a thorough title review, ideally conducted by a landman or an attorney with mineral rights experience in the applicable jurisdiction where the land is located.
2. Understand the legal landscape.
Every region handles mineral rights a little differently, and that can change a property’s value more than most buyers expect. Local rules, old leases, or royalty agreements can all affect what a new owner actually controls. Sometimes, an easement for a road or a buried pipeline has been in place for decades, quietly limiting how the surface can be used. It’s the kind of detail that’s easy to miss but can cause problems later if no one checks before closing.
3. Evaluate future potential.
A property’s location matters, particularly as it relates to mineral rights. Is it in an active or emerging basin where energy companies are investing and producing oil and gas?
For instance, in the Williston Basin, mineral rights have in many cases proven especially valuable. Buyers in these regions should weigh the property’s current condition as well as the likelihood of future leasing opportunities to operations and non-operators alike.
How to maximize your mineral rights holdings
For those who already own mineral rights, seek education and develop a strategy.
Understanding what you own.
Many mineral rights have been passed down through families for generations. While selling can be an emotional decision, understanding your land’s market value is critical. Owners should request valuations from credible operators or consult specialists before making decisions.
Investors and landowners should note that owning the surface does not automatically mean you own the minerals beneath it. Protecting your interests requires knowledge and preparation.
Weigh leasing vs. selling.
Is it better to lease mineral rights or sell them? Retaining mineral interests through a lease may offer royalty income, but the owner is exposed to price swings and development uncertainty. But if a third party purchases the mineral rights outright, the seller receives upfront value and may feel less exposed to the ups and downs of future development and commodity prices.
Negotiate favorable lease terms.
When leasing mineral rights, mineral owners should work to secure advantageous lease terms. Make sure to include strong royalty provisions and an appropriate lease term. It’s also important to have clear protections for how the surface of the property may be used. Hiring a landman or attorney (both within the jurisdiction where rights are located) can help protect both financial and surface interests.
Mineral rights: A value factor real estate agents can’t ignore
Real estate professionals who overlook mineral rights may miss critical factors that can influence a property’s value. Some properties that look appealing may be subject to legacy mineral agreements that affect their use or value.
Across the US, companies and mineral rights investors regularly acquire mineral interests in multiple states and deploy capital into both mineral rights acquisitions and drilling operations. This trend demonstrates a truth for real estate professionals: subsurface assets can affect a property’s long-term value.
Mineral ownership, regulatory frameworks, and market conditions can vary widely by state and by property. Anyone evaluating these issues should take the time to consult qualified legal and professional advisors and make decisions based on their own circumstances. As with any specialized area of real estate or energy, this discussion is meant to provide general perspective, not legal guidance. Markets change, assumptions evolve, and outcomes are never guaranteed, but informed decision-making starts with understanding the full asset, from the surface down.
Adam Ferrari is CEO at Phoenix Energy. He has nearly 20 years of experience in the oil and gas industry, following receipt of his bachelor’s degree in Chemical Engineering, magna cum laude, from the University of Illinois at Urbana-Champaign. He began his career with BP America in the Gulf of Mexico, then spent a stint in investment banking at Macquarie Capital, before transitioning back to the operating side with then-startup Halcón Resources Corporation. Following his tenure at Halcón, Adam pursued entrepreneurial opportunities in the mineral-acquisitions side of the oil and gas industry, which ultimately led him to Phoenix Energy.
