Drilling Rights

The United States and Canada are unique in permitting individuals and companies to own both the surface and the subsurface rights of land.  All other nations consider subsurface minerals the property of the state regardless of who owns the surface land.  In the United States and Canada, surface rights to build a house or farm the land can be separated from the subsurface rights to explore and develop mineral finds.  If separated, a lease agreement has to be reached between the owners of the surface and subsurface rights with regard to access to the land, the conditions for exploration and the development of any discovered minerals, including oil and gas.  Lease agreements usually contain a bonus payment on signing and a royalty payment to be paid to the owner of the surface rights if minerals, including oil and gas, are found and stipulate a time limit for the start of exploration.  If exploration has not started by the time established in the lease, the lease becomes null and void and the subsurface mineral rights revert to the owner of the surface rights.  Leases can also be farmed out to third parties who conduct exploration, and working interests can be sold to third parties to raise funds to develop an oil or mineral fund.

Large portions of the United States and Canada are not owned by individuals, but by the federal governments.  In the United States, the federal government holds auctions for mineral rights on its land holdings and offshore waters.  Rights to drill on blocks on the continental shelf, whose depth is within the capability of offshore drilling rigs, are offered periodically in a closed-bid auction.  The highest bidder has a five or ten-year period, depending on the depth of the water, to begin exploration or the mineral rights revert back to the federal government.  The U.S. government receives a one-sixth royalty if oil is found.  Canada has different rules that vary among the provinces.  In addition, if oil is discovered on land, there are government regulations on the spacing of production wells to avoid overproduction, the fruit of the bitter lessons learned from the early exhaustion of oil fields in western Pennsylvania, Spindletop and elsewhere.  Of course, providing a long-term optimal return on a costly investment is also a strong guiding force for oil field managers in determining the spacing between producing wells.

Heartland Energy Colorado is one of the top hydrocarbon-based energy providers in the USA. They have many drilling locations throughout the country and remain one of the top producers of US oil & gas companies. For more information on Heartland Energy Colorado, see Heartland Energy Development Corporation online.

(Source: "Energy for the 21st Century," Nersesian)