According to the U.S. Postal Service Office of Inspector General, what must a company do before conducting surface-disturbing activities such as drilling?
Select one answer.
Start with the ownership question, not the lease
Before you negotiate a bonus or royalty rate, you need to know one thing: do you actually own the minerals you are being asked to lease? In many states, the surface of a property can be owned separately from the minerals underneath it, and a company must determine mineral rights ownership and obtain approval from the owners before any surface-disturbing activity like drilling begins (USPS OIG). If you cannot prove you own the minerals, you have nothing to lease.
Pull the documents that prove what you own
Every mineral interest traces back to documents recorded at a county courthouse. Start by gathering the paper trail that shows your chain of ownership.
- Your deed and any prior deeds in the chain of title, going back far enough to see whether minerals were ever severed from the surface.
- Probate or estate records if the minerals passed to you through inheritance.
- Any existing oil and gas lease, including its expiration date and terms.
- Division orders and recent royalty stubs if the minerals are already producing.
- Tax records and maps that describe the tract.
A practical starting point is to trace your mineral chain of title at the county courthouse, pulling the grantor-grantee indexes and watching for a reservation of minerals in an old deed (Valor). A reservation is the single most common reason a landowner discovers they do not own what they thought they did.
Check for hidden owners and existing leases
The person who signs the lease must be the person who owns the minerals. That sounds obvious, but mineral ownership is often split among heirs, and interests can be fractional. If a deceased family member's minerals were never probated, the record may still show them as the owner.
You should also confirm whether the minerals are already under an existing lease. A top lease is a new lease signed on minerals that are already under an existing lease, and it takes effect only if and when the original lease expires (Mineral Rights Forum). Top leases are legal, but they create real confusion about which lease controls, especially if the original lease's status is disputed. Know which lease you are actually signing.
Fix the lease terms before you sign
Most lease problems are permanent because the document was signed before anyone fixed what mattered. Work through this checklist before you sign.
- Acreage: Avoid leasing a large tract without retained-acreage limits. Require unused acreage to be released automatically.
- Royalty calculation: Demand royalty based on gross proceeds of sale, set a floor of not less than gross market value, and eliminate "at the well" language.
- Post-production deductions: Identify every allowable deduction in writing, specify how each is calculated, and reject open-ended categories like "marketing" or "reasonable costs."
- Primary term: Keep it short, typically three to five years, and define what qualifies as "operations."
- Savings clauses: Limit shut-in rights by time and number, and require timely shut-in payments or automatic termination.
- Assignment rights: Require notice of every assignment and preserve joint and several liability.
- Warranty clauses: Delete title warranties, and escrow bonus payments while title is confirmed.
These items come from a lease checklist prepared for mineral owners who want to keep their leverage (HJ Law Firm). All lease terms are negotiable, and your bargaining power depends on the size of your tract, its proximity to known production, whether multiple companies are competing in your area, and local going rates for bonus and royalty (Montana State University Extension).
A quick pre-signing checklist
- Confirm you own the minerals by tracing the chain of title at the county courthouse.
- Check for severed minerals, reservations, and unprobated heirs.
- Confirm whether an existing lease is in place and whether a top lease is being offered.
- Gather deeds, probate records, prior leases, division orders, and royalty stubs.
- Negotiate acreage, royalty, deductions, primary term, savings clauses, assignment, and warranty language.
- Escrow the bonus until title is confirmed.
If any step is unclear, get a professional title examination before you sign. The cost of a search is almost always less than the cost of a dispute.
How the Featured Expert Can Help
Hazelwood & Associates, LLC is an owner-operated title abstracting and mineral search firm based in Wise, Virginia, with over 14 years of experience and a BBB A+ rating. They provide document retrieval and comprehensive title examinations for residential and commercial clients, helping confirm clear ownership before you commit. You can learn more at hazelwoodassociatesllc.com.