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Are Mineral Rights Considered Collateral?

Can my producing mineral rights on land that I do not own be used as collateral for a loan?

Mineral rights can be a thing of value and can be pledged as collateral. An existing mortgage on property may or may not include mineral rights. If it does not, they may be used on other loans, but if you do not own them, like anything else, you have no rights to pledge them.

This question seems to be one of having mineral rights to property that you do not own. Verify it with your state laws, but if you have a valid contract giving you mineral rights, that contract should be able to be assigned to someone else and pledged as collateral, so long as you are not prohibited from doing this. If your agreement says you, and only you have the mineral rights and they may not be transferred, you'd be out of luck.

The trick now would be to find someone who wants to take them as collateral. Just because they can be, doesn't mean every lender would accept them. You'd need to show that there is a track record of cash flow generation and that it is expected to continue. Even then, in all likelihood, the lending group that would want them as collateral would be small.

Published on 8/04/09