real estate

When do mineral rights revert to an owner?

Steve McLindenq_v2.gifDear Real Estate Adviser,
The mineral rights to a property we own in New York belong to a company that's no longer in business. The firm's gas wells have been pulled and pipelines have been abandoned. Do their rights then revert to the original owner?
-- Mike

a_v2.gifDear Mike,
Possibly. You or a legal representative will need to check your natural gas lease for its "primary term," or the number of years the lease is in effect. These can range from a couple of years to more than 10 years. However, there can be many other variables from one lease to another and from one region to another that are buried in the fine print. You certainly can't assume upfront that you will regain your mineral rights.

Many such gas leases get extended beyond their primary term into a "secondary term" as they are pooled with other leases to create a producing well. Those leases often expire when production ceases, which it apparently has in your vicinity, at least temporarily.

That all may be moot if the energy company that abandoned your area had a "lease assignment" option in your lease. The option is spelled out in a clause that allows the company to sell or assign its interest in your mineral rights to another firm. Again, your lease will tell the tale.

If you have a sizable property in an area rich in gas deposits that would make the reclamation of your mineral rights worth the expenditure, you might hire an oil-and-gas or real estate attorney with experience in mineral rights to help you regain them, assuming you have some leverage. In some cases, mineral rights can be taken over by the owner of the surface property if they haven't been utilized over a set period (usually 20 years), an action that often requires a public notice.

As an aside, property owners in most states, including New York and Texas, are typically allowed to convey their mineral rights only for oil, gas and water, not for metals, ores and the like. In many instances, natural gas companies that have leased, and in some cases purchased, mineral rights from property owners have successfully skirted some of their royalty or other payment obligations to those owners through legal maneuvers, particularly after natural gas prices tumbled in late 2008.

For more regional information, visit state Web sites related to mining such as New York's Division of Mineral Resources site or the fast-growing mineral rights discussion forum.

It is hoped that all's well that ends well in your quest to regain your mineral rights.

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