Sale of Mineral-Classified Land Interests in Texas

Understanding the Sale of Mineral-Classified Land Interests in Texas

Mineral-classified land is different from most privately owned property in Texas. Under the Texas Relinquishment Act, the State of Texas owns the oil and gas beneath certain properties, while the private surface owner holds important rights associated with leasing and mineral production.
Because of this unique ownership structure, selling the economic benefits associated with mineral-classified land may require conveying a corresponding interest in the surface estate.

What Is Mineral-Classified Land?

On mineral-classified land governed by the Relinquishment Act, the State of Texas owns the minerals. The private surface owner—often referred to as the “owner of the soil”—acts as the State’s leasing agent.

In that role, the surface owner may be entitled to participate in certain benefits related to oil and gas development, including:

Although these benefits resemble privately owned mineral and royalty rights, they arise from ownership of the surface estate and the surface owner’s statutory relationship with the State.

Why Is the Transaction Structured as a Surface Purchase?

Because the State owns the minerals, the surface owner cannot sell the State’s mineral estate through an ordinary mineral deed. An owner may potentially assign the royalty income payable under an existing lease without conveying the surface. However, that type of assignment generally lasts only for the remaining life of that particular lease. When the existing lease terminates, the separately assigned lease benefits also terminate.

Liberty Mineral Partners is generally interested in acquiring more than the revenue payable under an existing lease. Our purchases may also include the continuing right to participate in:

Future leases and lease bonuses
Royalties from future production
Future pooling or unitization
New wells drilled under future agreements
Development occurring after the current lease terminates.

These continuing Relinquishment Act rights follow ownership of the surface estate. Therefore, transferring those rights requires the transaction to include the corresponding surface interest.

The conveyance may be documented as a surface deed even though the primary economic purpose of the transaction is to acquire the oil and gas participation rights associated with that surface ownership.

Is the State’s Mineral Ownership Being Sold?

No. The State of Texas continues to own the minerals.

Liberty Mineral Partners acquires the surface interest and the Relinquishment Act rights legally associated with that ownership. The transaction does not transfer the State’s mineral estate to Liberty Mineral Partners.

Does Liberty Mineral Partners Intend to Use the Surface?

Our primary purpose is to acquire the associated oil and gas participation rights—not to occupy, farm, ranch, develop, or otherwise interfere with the physical surface.

We understand that a surface conveyance can initially sound unusual when the seller’s primary interest is royalty income. The structure is necessary because continuing Relinquishment Act rights are tied to surface ownership rather than to a privately owned mineral estate.

Independent Information

Property owners do not have to rely solely on Liberty Mineral Partners’ explanation.

The Texas A&M Real Estate Research Center provides an independent discussion of mineral-classified land. Its article explains that executive rights follow surface ownership and that a separate conveyance of benefits under an existing lease generally lasts only for the duration of that lease.

The Texas General Land Office also explains that the surface owner of Relinquishment Act land acts as the State’s leasing agent and shares in applicable bonuses, rentals, and royalties.

Every Property Is Different

Each mineral-classified property has its own title, leasing, pooling, and production history. Liberty Mineral Partners carefully researches each property to determine:

The land covered by the applicable lease or unit
The surface interest owned by each party
The royalty or participation rights associated with that ownership
The effect of existing leases and pooling agreements
The interest that must be conveyed to transfer both current and future rights.

Liberty Mineral Partners is happy to explain our research, the interest covered by an offer, how the purchase price was calculated, and which rights would and would not be transferred.

To learn more about your mineral-classified property or request a no-obligation evaluation, contact Liberty Mineral Partners today.

832-391-8342

liberty@libertymp.com