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Mineral Lease

DEFINITION

A mineral lease is a contract between a company or a person and a real estate owner that allows the lessee to dig below the property’s surface to explore the soil and exploit the minerals found.

EXPLANATION

There are various clauses and stipulations that are commonly included in mineral leases. Some mineral lessees propose bonus payments to mineral owners to entice them to make deals. These bonus payments are usually paid to lessors at the beginning of the lease arrangement, because many mineral owners are not willing to wait years to receive compensation for the extraction of the minerals in their soil.

Typically, the mineral owner receives a portion of the income derived from the production of the minerals. This royalty payment can be based on a specific number for every ton of minerals generated, or it can be calculated as a specific percentage of the income produced. Mineral leases also usually contain guidelines for what will need to be done if a hazard or problem occurs during production or if the lessee decides to transfer mineral ownership to another entity during the term of the lease. Some mineral leases even allow the surface rights owner to conduct inspections of the mineral owner’s production process and examine the mineral owner’s books to glean more information about the production and find out what sales price the lessee is offering for the mineral.

Certain states require mineral owners and mineral mining companies to utilize Surface Use Agreements to conduct business. A Surface Use Agreement details the relationship between the lessee and the surface rights owner. Since most states do not mandate the usage of a Surface Use Agreement to commence production, they are usually voluntary contracts made to ensure copacetic dealings between lessors and lessees.

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