In many real estate transactions, the focus remains squarely on surface value. Where is the property located? How is it zoned? What investment potential does it have? But beneath the surface lies an often-overlooked asset class with the potential to significantly alter a property’s worth: mineral rights.
Mineral rights represent the ownership of subterranean resources of a parcel of land, including oil, natural gas, coal, and metals. Importantly, they can be sold or leased independently from the surface rights to the land above them. In effect, a single parcel of land can be monetized twice — once for the surface rights and once for the right to extract the resources beneath it.
For real estate professionals and landowners, mineral rights deserve more than a passing glance. While they can introduce legal and financial complexity, they also present opportunities for enhanced value creation.
How mineral rights affect property values
Mineral rights can affect property values in several ways:
1. Future development potential
A landowner who retains mineral rights may benefit from leasing opportunities or royalty payments if oil, gas, or other minerals are extracted from their land. These potential income streams can materially increase a property’s overall value.
2. Marketability of the property
In areas where oil production is common, such as North Dakota’s Williston Basin, properties with intact mineral rights can fetch higher prices. Conversely, if mineral rights have been severed from the surface rights in resource-rich areas, the property may be discounted because the surface owner lacks control over what happens beneath the ground with respect to the mineral rights.
3. Surface use considerations
When mineral rights are sold or leased separately, the mineral owner has the right to reasonable use of the surface to explore for and extract the minerals. Future drilling, pipelines, or mining activity may disrupt surface use, including potentially impacting agricultural, residential, or commercial plans. This impact can reduce surface property value if not managed carefully.
These dynamics mean that mineral rights can either add value or introduce risk — depending on ownership status and the surrounding market.
Advice for prospective buyers of mineral rights
For buyers of mineral rights, due diligence is essential. Here are three key steps that every buyer should take:
1. Verify ownership
Mineral rights can be severed and sold decades earlier, often leaving property owners unsure of their status. Buyers should commission a thorough title review, ideally conducted by a landman or an attorney with mineral rights experience in the applicable jurisdiction where the land is located.
2 Understand the legal framework
Local regulations, permitting requirements, and existing leases or royalties tied to the property can dramatically alter the value of the associated mineral rights. Easements for access roads, storage facilities, or pipelines may already be in place and could also impact the value of the surface rights. Buyers need to know whether these encumbrances exist before closing a deal.
3 Evaluate future potential
A property’s location matters, particularly as it relates to mineral rights. Is it in an active or emerging basin where energy companies are investing and producing oil and gas?
For instance, in the Williston Basin, mineral rights have proven especially valuable. Buyers in these regions should weigh not only the property’s current condition but also the likelihood of future leasing opportunities to operations and non-operators alike.
Advice for mineral rights owners
For those who already own mineral rights, education and strategy are key.
Know your assets
Many mineral rights have been passed down through families for generations. While selling can be an emotional decision, understanding the market value is critical. Owners should request valuations from credible operators or consult specialists before making decisions.
Weigh selling versus leasing
Holding mineral rights can yield long-term royalties, but it also comes with risks, such as commodity price volatility, regulatory shifts, and the uncertainty of when (or if) operators will drill. Selling mineral rights to a third party can provide upfront value and transfer risk to the buyer.
Negotiate favorable leases
When leasing mineral rights, owners should carefully negotiate terms such as royalty rates, lease duration, and surface use protections. Professional guidance from a landman or an attorney in the applicable jurisdiction where the rights are located can help owners protect both their financial and surface interests.
As I often tell investors and landowners, owning the surface does not automatically mean you own the minerals beneath it. Protecting your interests requires knowledge and preparation.
Why this matters for real estate professionals
Real estate professionals who overlook mineral rights may miss critical factors that influence a property’s value. On one hand, a property that appears attractive on the surface may harbor hidden encumbrances tied to severed and sold mineral rights. On the other, it could hold untapped value in mineral rights.
Across the US, companies and mineral rights investors regularly acquire mineral interests in multiple states and deploy capital into both mineral rights acquisitions and drilling operations. This trend underscores a truth for real estate professionals: subsurface assets can reshape a property’s long-term economics.
From a real estate perspective, mineral rights remain a specialized niche, with relatively few companies equipped to manage them at scale. But for buyers, sellers, and investors who understand their impact, mineral rights can be a differentiator that turns an ordinary land deal into a strategic investment.
Final thoughts
In real estate, what you see on the surface is only part of the picture. Mineral rights, though often overlooked, can alter a property’s value, its future use, and its overall investment potential.
For buyers of real property, the lesson is due diligence. For mineral rights owners, the lesson is education and careful decision-making.
Above all, remember that mineral rights are a unique intersection of law, geology, and finance. Approaching them with foresight and professional guidance ensures that these unseen assets work for you — rather than against you.
— Adam Ferrari is CEO at Phoenix Energy. He has nearly 20 years of experience in the oil and gas industry, following receipt of his bachelor’s degree in Chemical Engineering, magna cum laude, from the University of Illinois at Urbana-Champaign. He began his career with BP America in the Gulf of Mexico, then spent a stint in investment banking at Macquarie Capital, before transitioning back to the operating side with then-startup Halcón Resources Corporation. Following his tenure at Halcón, Adam pursued entrepreneurial opportunities in the mineral-acquisitions side of the oil and gas industry, which ultimately led him to Phoenix Energy.
*Disclaimer: The information contained in this article is meant for general informational purposes only. While Phoenix Energy One, LLC (together with its affiliates, “Phoenix”) makes every effort to ensure the accuracy and currency of the information presented, it cannot guarantee it. Phoenix does not provide legal advice, and the information contained herein should not be considered a replacement for obtaining legal advice related to the subject matter hereof. Phoenix recommends you consult with a qualified legal expert for advice tailored to your specific circumstances. Any reliance on the information contained herein is done at your own risk. Phoenix disclaims any liability for loss or damage, including indirect or consequential loss or damage, arising from or related to the use of the information in this article or the reliance upon the information presented.
