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Oil and gas have brought a great deal of wealth to Texas, along with disputes over ownership of various associated rights, known as “mineral rights.” In high-asset divorces, mineral rights can be a major area of contention. Identifying the mineral rights at issue, determining what is community and separate property, and finding a way to divide or distribute mineral interests equitably can be a significant challenge.
Texas is oil and gas country. Oil and natural gas have been an integral part of Texas’ image and identity for over a century. The pumpjack serves as a symbol of Texas almost as often as the cowboy hat, the roadrunner, or the armadillo. The Houston area is the birthplace of the Texas oil boom of the early 20th century. The 1901 oil strike at Spindletop helped launch Houston from a small town to one of the largest cities in the United States. Today, the area between Houston and Beaumont hosts the world’s largest concentration of oil refineries and petrochemical plants.
Texas divorce law identifies two types of property owned by divorcing spouses: Community and separate property. The spouses jointly own community property, also known as marital property. A court must make a “just and right” division of community property in a final decree of divorce.
The law defines community property as anything owned by the spouses during the marriage that is not separate property. It presumes that everything owned by the spouses during a divorce case is community property, unless a spouse can show that something fits one or more criteria of separate property. Separate property includes:
In order to understand how a Texas court might divide mineral rights in a divorce, it is necessary to understand a bit about how mineral rights relate to ownership of land. When a person buys real estate in Texas, they own both the surface of the land and the minerals underneath the land. These are known as “surface interests” and “mineral interests,” respectively.
Texas law allows landowners to sever mineral interests from surface interests, and to sell them separately from the surface interest. Once they have been severed like this, the mineral interests are known as mineral rights.
Mineral rights are considered real property under Texas law. They can be community or separate property just like any other real or personal property in a divorce.
The idea of severing mineral rights from land ownership may seem strange to people hearing about it for the first time, and it is quite strange. The term “mineral rights” actually refers to multiple different rights, each of which can be sold or conveyed separately from the others.
The owner of mineral rights, also known as a mineral estate, might not own the land over the minerals, i.e. the surface estate. They still have the right to go onto the land in order to extract minerals, such as by drilling for oil. The owner of the surface estate cannot bar them from the land completely. At the same time, the owner of the mineral estate must be as unobtrusive as possible. They cannot, for example, damage a house located on the surface estate in order to get to the oil or gas.
The right of access to property described above assumes that the owner of the mineral estate will try to drill for oil themselves. Most people do not have this capability, so Texas law allows mineral estate owners to lease the right to extract minerals to someone else, like an oil exploration company.
The lessee of a mineral lease has the same obligation to respect the surface estate owner’s property as the mineral estate owner. The advantage of a mineral lease for mineral estate owners is that they have the right to receive payments from the lessee.
Many mineral leases require a lessess to make a one-time payment at the start of the lease term. This payment may cover the entire lease term, meaning that the lessee does not have to make any further payments to the owner until the end of the term. The lease may require other payments.
Mineral lessees make royalty payments to mineral estate owners based on the amount of oil or gas produced. Royalty payments might begin after the term of a lease covered by a bonus payment, or they might begin as soon as the lease begins. The most common type of royalty is a percentage of the total production from a lease.
A person can own a royalty interest that is separate from ownership of the mineral estate itself. A royalty interest owner is not responsible for any of the costs of exploration of production, but they may have to pay a pro rata share of other expenses.
If one or both spouses own mineral rights, the first task is to determine whether they are community or separate property. If the mineral rights are community property, how best to divide them will depend on the type of mineral rights. The division could involve one spouse buying out the other spouse’s portion, or some form of joint ownership. In the case of royalty interests, the spouses could simply divide the percentage in half, so each spouse can receive royalty payments.
Board-certified family lawyer Stacey Valdez practices in the greater Houston, Texas area. She advocates for people during profoundly difficult ordeals like divorce, child custody disputes, and other family law matters. you and your family will always be a top priority for our team at Stacey Valdez & Associates. We are committed to representing our clients with tireless advocacy, compassion, and dignity. Please contact us online, or give us a call at (713) 294-7072 today to schedule a confidential consultation to discuss your case. Your first meeting with us is free in most situations.