Subsurface rights

Key Takeaways

• Subsurface rights cover what lies beneath a parcel, including minerals, oil, and gas, and in theory they reach from the surface down toward the center of the earth.
• Subsurface rights can be sold, leased, or reserved separately from the surface, so a buyer can own the land and not own what is under it.
• In Washington a mineral interest that has gone unused for twenty years can be extinguished by the surface owner.
• Owning the ground does not hand the owner the groundwater. Washington requires a permit to withdraw public groundwater unless the use fits a listed exemption.

What It Means

Subsurface rights are the part of real property ownership that reaches below the surface of a parcel: the soil, rock, minerals, oil, and gas underneath it. Land is not only the visible surface. The classic description is that the owner's claim runs from the surface down toward the center of the earth, and the mineral, oil, and gas rights, often shortened by instructors to MOG rights, sit inside that claim.

What makes this matter in a sale is that the Bundle Of Rights can be pulled apart. An earlier owner can sell the subsurface, or reserve it while conveying the surface, and once that happens the two estates travel separately down the chain of title. A buyer can take a warranty deed to forty acres and still not own the coal, gravel, or gas below it, because the mineral estate belongs to somebody else and is recorded in its own right. Severed subsurface interests surface as exceptions on the preliminary title report, which is where a broker should be looking before a client counts on anything underground.

How It Works in Washington

Washington treats a subsurface interest as an interest in real estate, so it moves under the same formalities as any other transfer. RCW 64.04.010 provides that every conveyance of real estate, or any interest therein, and every contract creating or evidencing any encumbrance upon real estate, shall be by deed. A mineral reservation written into a deed decades ago is therefore a recorded interest that every later buyer takes subject to. Washington also gives the surface owner a cleanup tool. Chapter 78.22 RCW, titled "Extinguishment of unused mineral rights," provides that a mineral interest unused for a period of twenty years may be extinguished by the surface owner. RCW 78.22.020 defines a mineral interest as an interest of any kind in any subsurface mineral created by grant, assignment, or reservation, and RCW 78.22.030 lists what counts as use, including production, injection or storage operations, payment of rents or royalties, payment of taxes on the interest, a recorded transfer, and a statement of claim filed by the mineral owner. Water below ground is handled on its own track. RCW 90.44.050 requires a permit to withdraw public groundwater, with exemptions for stock watering, watering a lawn or noncommercial garden of no more than half an acre, and single or group domestic use up to five thousand gallons a day, so Water Rights do not simply come with the dirt.

Example

Cole Whitaker buys 40 acres outside Ellensburg for $310,000, planning to sell about $40,000 of gravel off a hillside. The preliminary title report lists an exception: a 1961 deed in which the seller's grandfather reserved all mineral, oil, and gas rights and conveyed only the surface. Cole's broker asks the Title Insurance company for a copy of that instrument. The reservation is real and was never released, so the gravel is not Cole's to sell. A search of the county records turns up no production, no lease, no royalty payments, and no statement of claim since 1961. Cole closes on the surface at $310,000, then takes the file to a real estate attorney to consider a chapter 78.22 RCW action, because far more than twenty years of non-use have run.

Common Mistakes and Exam Traps

• Surface rights and subsurface rights are separate sticks in the bundle. Buying the surface does not automatically carry what lies beneath it.
• Subsurface rights and air rights are mirror images, one reaching down and one reaching up. Exam questions swap the two on purpose.
• A mineral reservation is not an easement. It is a separately owned interest in the land and appears on title as its own exception.
• Owning subsurface rights is not the same as owning the groundwater. Washington requires a water right permit for withdrawals that do not fit a statutory exemption.