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What do you really own?

If you own a piece of land in California and it potentially may have viable oil and gas reserves beneath it, it is important that you understand exactly what it is that you mean when you say you "own" the property. Property law is ancient, as ownership of land has always been important, and land does not disappear the way more transitory objects do.

This is why in California there are land holdings that date their original ownership back to land grants from the Spanish and Mexican governments in the 18th and 19th century. The war with Mexico and the Treaty of Guadalupe Hildalgo contained a mechanism for validating these land grants in the context of U.S. law and confirming the land patents.

The basic ownership of land is a "fee simple," and would indicate that you own all of the rights available, including the surface, subsurface and air rights, subject to some governmental controls, such as taxes, taking rights, and escheat.

A fee simple ownership of land permits you to grant a lease of the mineral rights for extraction. One of the complexities of mineral leases, such as those for oil and gas extraction, is that you may have to sell some of your rights in order to determine whether your land has viable oil or gas fields.

This process is time-consuming and buyers of oil and gas leases may have variable interests. Some may hold the lease in speculation, hoping to see the price increase, some entities may plan to hold the lease for years as part of their reserve and other may plan to immediately begin exploration.

You want your attorney at the table when these options are discussed, working to ensure your rights are protected. A lease is a complicated instrument and you want it done properly the first time.  If you live on the land being leased, you don't want to awaken one morning to find a drilling rig being erected in your vegetable garden. Details such as these should be dealt with in your agreement.

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