Mineral deeds are documents that convey mineral rights in a property. It is the evidence of a sale by a direct grant of a separate estate and the title to the property vests on the purchaser.
A mineral deed is different from a mineral lease, in which a lessee has to engage in developmental activities and production of oil and gas has to be done during the lease period. In a mineral deed development may or may not take place. It has no relevance with regard to an owner who conveys the title.
Different courts have held differently with regard to the right that vests on the basis of a mineral deed. Some courts have held that a conveyance by mineral deed of the gas and oil that lie beneath the surface of his/her land vests a fee-simple estate or independent ownership in the gas and oil. But some courts have held that such a transfer only vests a right to acquire title by entering upon the land and extracting the gas and oil. A grantee of oil rights is sometimes said to acquire a right to remove a part of the substance of the land.
The granting clause of a deed will be looked into to understand the nature of the interest that is conveyed by a deed. If it conveys an interest in and to all of the oil and gas that might be produced from the land described in the deed and reserves a right to delay rentals and bonus money then, it can be said that a mineral interest is conveyed.
In the case of ambiguity, the general rules of construction of deeds affirms that a court should take into consideration the language employed, the subject matter, surrounding circumstances, and essentially the deed as a whole[i].
A mineral deed may specify the exact interest that is conveyed whereas some other deeds only use general terms. The general intent of the parties is looked into to construe the meaning of the language used within mineral deeds. Court may interpret the mineral deed reasonably giving the terms their ordinary meaning.
A mineral deed conveying mineral rights is considered valid even though oil and gas cannot be considered distinct from the soil. A mineral right in a land can be severed and conveyed, thereby creating two distinct rights with respect to one property. Mineral rights can be considered distinct from surface rights and a person can have an independent ownership of mineral rights.
An owner of the surface land cannot claim adverse possession of the mineral rights or the mineral estate because both are severed and possession of the land does not include possession of the mineral underneath. A right of a person holding a mineral right will not be affected by the fact that an owner of the surface was not aware of the fact that a mineral right was severed from the land. A right conveyed by a mineral deed is not ceased due to keeping the mineral interest idle. But provisions may be included in a specified term that if there is no production in paying quantities during a specified period, the mineral interest shall terminate.
In certain jurisdictions, the interest of a grantee of mineral rights under a mineral deed is allowed to remove an interest from the land. Oil rights may be recognized and transferred as interests in real property in some jurisdictions. All the incidental rights of the ownership of real property are attached to the estate of the grantee under a mineral deed. If a mineral deed is for an indefinite period that conveys mineral rights, then it is a conveyance of an interest in land and a freehold estate.
A mineral deed passes all the rights and privileges required for the enjoyment of the mineral estate in the same way as the owner of a surface estate. An owner under a mineral deed has the right to bring a suit for ejectment to protect his/her interest just like an owner of a surface estate. The right to receive bonuses and royalties arising out of the existing leases are also part of an unrestricted mineral interest.
A mineral deed entitles a grantee of the deed to delay rentals from a lease if it is not excepted from the deed. S/he has a right to lease the premises for the purpose of gas and oil exploration and development. The inaction from the lessee, of grantee of a mineral deed, may not terminate the mineral deed. If there is a termination of production, a grantee has to prove that a cessation is temporary.
[i] Calvert Joint Venture # 140 v. Snider, 373 Md. 18 (Md. 2003).