Mineral interest definition
/What is a Mineral Interest?
A mineral interest is an economic interest in subsurface minerals. This interest gives the owner the right to mine the minerals situated beneath the surface of a property. In a mineral interest arrangement, each party individually holds an interest in an oil and gas asset and is also liable for any obligations that may arise. It is possible to acquire mineral rights separately from the surface rights of a property.
For the purposes of this definition, minerals are assumed to include hydrocarbons.
Mineral Interest Conveyances
An organization may convey mineral interests in its properties to a third party, perhaps to spread risk or to obtain additional financing. These conveyances may involve the transfer of some or all of the rights and responsibilities associated with a property.
A mineral interest conveyance should include the following items:
The names of the grantor and grantee
A description of the property
The type of interest being conveyed (which can be a mineral interest, royalty interest, or leasehold interest)
The extent of the conveyance (such as the transfer of a full interest or fractional interest)
Any rights reserved by the grantor, such as retaining a portion of the mineral rights, a royalty interest, or surface rights
A warranty of title, where the grantor guarantees that it has clear ownership and the right to transfer the interest
The price or value exchanged for the transfer
Accounting for a Mineral Interest
Since no separate legal entity is involved in a mineral interest arrangement, each party records its proportionate share of the underlying revenues, expenses, assets, and liabilities.