Insights with Inked

How to Mitigate Your Risks with Mineral Rights in Renewable Energy Projects

As you transition from early to late-stage development, you need a title policy, and it won’t be issued without a mineral endorsement! What? How do I get a mineral endorsement, what are mineral rights, and where do I need to look out for?

Imagine experiencing this on your next solar or battery energy storage project:

Site control is secured, land and environmental constraints look good, and interconnection queue and grid capacity check out. Your gen-tie route is clean and your interconnection application is moving along. Things are looking good!

As you transition from early to late-stage development, you need a title policy, and it won’t be issued without a mineral endorsement! What? How do I get a mineral endorsement, what are mineral rights, and where do I need to look out for?

Mineral owners’ rights are crucial when acquiring or leasing property for renewable power generation or energy storage projects. Failing to recognize and negotiate with these owners can derail the project entirely.

In this article, you will learn:

  • The basics of mineral ownership and the impact it can have on renewable power generation and energy storage projects.
  • What a mineral endorsement on a title policy is, and what agreements are needed to secure it.
  • How leveraging a professional service provider like Inked Land Company (Inked) can mitigate risks and streamline your project.

With the right approach, you can ensure mineral owners and their rights can coexist with your project. Let’s discuss how to navigate the complexities of mineral rights and ensure your project is built on solid ground.

What Are Mineral Rights?

Ownership of mineral rights, or the mineral estate, provides an owner the ability to extract underground resources like oil, natural gas, coal, and precious metals.

In many states, the mineral estate comprises five separate and distinct rights.

  1. The right to lease.
  2. The right to receive delayed rental payments.
  3. The right to receive a bonus for executing a lease.
  4. The right to receive royalty payments for production.
  5. The right to produce or extract minerals from the property, including rights of ingress and egress.

Subject to zoning, land use, and regulatory hurdles, owners of the mineral estate have the right to extract underlying minerals if they choose.

Surface Rights vs. Mineral Rights

Ownership of surface rights, or the surface estate, provides an owner the ability to use a property’s surface for activities like living, farming, and conducting business operations. The surface estate and the mineral estate are often severed, which means the mineral estate can be bought and sold separately from the surface estate.

In simple terms, even though you own the surface of a property or have site control of a property, you may not own the minerals underlying it. This separation is most often created by a reservation or a grant in a chain of title.

Managing Mineral Rights for Renewable Energy Projects

Mineral Rights Matter

Mineral rights matter in developing renewable energy projects because they are dominant over surface rights. This means the surface owner is subservient. The owner of the mineral rights, or their lessee, has the right to access and use the surface reasonably to extract minerals.

Ignoring Mineral Rights

If you’re unaware of who owns the mineral rights or lack agreements to honor these rights, they could delay or stop your construction. They might even require the dismantling of parts of your solar or energy storage project.

Financing and Title Insurance

If you plan to finance your project, you’ll need a title insurance policy. Without addressing mineral rights, however, a title policy may not be issued.

To issue a policy, a mineral endorsement is usually required, which means securing agreements to reduce risks from mineral rights owners. If you fail to secure this endorsement and proceed with construction, your development could be uninsured against actions by mineral rights owners, such as forced deconstruction. This could leave you or any future stakeholders liable for damages without recourse to the mineral rights owners or the title insurance company.

Subsurface Waivers or Non-Surface Disturbance Agreements

In our experience, a subsurface waiver or non-surface disturbance agreement is the most common type of agreement put in place between a mineral estate owner and a renewable energy developer. These agreements can be challenging to acquire and often have no precedence set for valuation. Many things can influence this, including:

  • Proximity to oil and gas or other mining activity
  • Sophistication of mineral estate owners
  • Expectations of compensation

This creates a significant timing hurdle that must be factored into your development timeline. Typically, this process can take six months to a year or more. Be proactive and plan ahead!

Mineral Rights Challenges to Watch Out For

These next topics can be quite intricate, but remember, they’re crucial and shouldn’t be ignored.

  • Fractional Interests – The mineral estate can be split amongst many owners. Inked has seen the mineral estate underlying a property owned by thousands of individuals and entities. Don’t overlook minerals, their impact on your project, or the time it will take to engage mineral owners.
  • Working Interests – Don’t just focus on mineral owners. Lessees of mineral estates, also called working interest owners, also have rights of ingress and egress to the surface. Make sure to consider both mineral owners and working interest owners to effectively mitigate your risks.
  • Depth Severances – Did you know the mineral estate can be severed, or have different owners, at different depths? This means ownership of the mineral estate can be different from, for example, (a) the surface to 5,000 feet below the surface and (b) 5,000 feet below the surface to the center of the Earth.
  • Product Severances – Did you know there can be different owners of different minerals underlying the same property? For example, someone can own coal, someone else can own oil and gas, and someone else can own rare Earth minerals.
  • Heirship or Estate IssuesIf a mineral owner is deceased, it is important to know if their estate was administered properly. To secure the appropriate subsurface waivers, you may have to probate an estate or progress through administrative proceedings to ensure you can obtain a mineral endorsement on your title policy.
  • Unreleased Mortgages or Liens – The mineral estate can be encumbered by mortgages. It is possible for a mineral owner to finance outside activities by mortgaging their mineral estate. You may have to deal with a bank or another sophisticated mortgagor.
  • Mineral Notification Lists – In some jurisdictions, the land use permitting process requires certifying that mineral owners have received notification. You may not be able to obtain the appropriate permit if you do not know who owns the minerals.

How Inked Can Help

Inked has a title department with deep expertise in the oil and gas industry. We also understand and participate in the renewable development process. This means we understand mineral rights and the challenges associated with them and can help you navigate the impacts they might have on your project.

Inked’s Title Service Offerings

  • Surface Title Reports
  • Mineral Title Reports
  • Cursory Title Reports
  • Curative Title
  • Competitive Lease Research
  • Mineral Notification Lists
  • Subsurface Waiver Requirements (pair this with Land Services to acquire subsurface waivers)
  • Abstracting
  • Due Diligence
  • Water Rights Research

We will provide a comprehensive review of all rights affecting your property, offer clarity and guidance on how to proceed with subsurface waivers or curative measures, and remove frictions throughout your development process.

Due to the intricate nature of mineral rights, trust the experts at Inked for guidance. We’d love to learn more about your project and timelines. You can contact us by calling 970-200-8545 or email us at contact@inkedlandco.com.