FAQs for Mineral Rights & Royalties
- Craig Kaiser
- May 5, 2024
- 5 min read
The world of mineral rights and royalties can be both intriguing and complex, offering landowners unique opportunities to profit from natural resources beneath their land without direct involvement in extraction processes. Whether you're a seasoned landowner or new to the concept, understanding the intricacies of mineral rights and the royalty framework is essential to ensure fair compensation and informed decision-making. This resource explores key aspects such as the valuation of mineral rights, regulatory considerations, environmental impacts, and strategies for maximizing returns. By gaining insights into these areas, you'll be better equipped to navigate the potential of mineral resources responsibly.
What are My Mineral Rights Worth?
The most accurate way to determine the value of your mineral rights is by getting a real offer from a qualified buyer. However, there are a few general guidelines that can provide a rough ballpark estimate. While these won't give you a precise number, they can help you get a general idea of what your mineral rights might be worth.
The value of your mineral rights depends on the phase of the mineral rights ownership and whether or not they have been leased and are producing oil & gas. There are non-leased mineral rights, leased mineral rights, and producing mineral rights.
Non-leased Mineral Rights: These are mineral rights that are not under an active lease that you are not receiving royalty income from.
Value of Non-Leased Mineral Rights: Up to $1,000 per acre, often falling between $0 and $250 per acre.
Leased Mineral Rights: These are mineral rights under an active lease with a developer or drilling company.
Value of Leased Mineral Rights: Generally 2 to 3 times the value of your lease bonus.
Producing Mineral Rights: If you are receiving royalty payments, you own producing mineral rights.
Value of Producing Mineral Rights: Two key factors influence the worth of your producing minerals- the cash flow (determined by royalty income) and future potential (the possible value if additional wells are drilled and production increases). Producing mineral rights without future potential generally sell for approximately 4 to 6 years' worth of your average monthly income.
Curious about what your mineral rights are worth? Get a free LandApp property report! Just find and click on your parcel on LandApp's map and check out the Minerals value index score for a free estimate:
If you're interested in selling your mineral rights or royalties, you can list your mineral rights for sale or for lease on LandApp's marketplace- it's free, and there are no obligations to accept any offers. If you leased your minerals, but not yet receiving royalty checks, you can list your minerals on LandApp as 'Leased Minerals for Sale.' If you have not leased your minerals, you can list them for Lease or Unleased Minerals for Sale.
I Bought Land. Do I Own the Mineral Rights?
If you have purchased land, then you signed a Deed at closing. If the Seller owned all or a portion of the mineral rights, and the mineral rights were not reserved in the deed, then all the mineral rights owned by the Seller were passed to you. It is important to understand that just because there is no mineral reservation in the deed, does not mean that mineral rights were passed to you.
The mineral rights could have been severed from the surface rights (mineral reservation) in a prior deed. If you want to know if your Seller owned mineral rights, you would need to contact the County Clerk in the county in which your property is located. The County Clerk will either assist you in researching property deeds or recommend a landman or abstractor to assist you.
What's the Difference Between an Oil and Gas Lease Bonus and a Royalty Payment?
An oil & gas lease bonus is a one-time payment made to you at the time the lease is signed.
Example Bonus Calculation:
If you own a 25% mineral interest in 640 acres
Then you own 160 net mineral acres (640 X 25%)
If the offer Is $350/net mineral acre, you will receive a Bonus check in the amount of $56,000 ($350 X 160)
A oil & gas royalty is a portion of the proceeds from the sale of production paid monthly to mineral owner.
Example Royalty Calculation:
If you negotiated a 12.5% royalty when you signed the lease and the Operator successfully drills a well producing 500 BOPD
Operator sells the oil and nets $57/bbl
You would receive a monthly check in the amount of $106,875 (500 bbls/day x 30 days x $57 x 12.5% Royalty = $106,875/month)
How Do I Know if I Own Mineral Rights?
The best way to find out if you own minerals is to research the deed records in the County Clerk’s office in the County or Parish where the property is located. Title research can be very difficult. Often it requires the services of an experienced land professional or title abstractor. The real estate and oil and gas industries supply the majority of experienced title researchers. We recommend that you call the County Clerk’s office and ask them for a recommendation. These researchers spend the majority of their time in the County Clerk’s office and often ask the Clerk to divulge their contact information to anyone needing title research done.
My Father Was Receiving Royalty Checks When He Passed. How Can I Get Them?
You need to call the company who was sending your father monthly royalty checks. If he was receiving a royalty check, those checks are mail pursuant to an oil and gas lease signed by your father or a predecessor in title. The oil and gas lease provides that if there is any change in ownership, the Lessor (your father, and now you) are responsible for notifying the oil company. The oil company will require documentation such as a death certificate, will, probate, etc. And the royalty payments will be put in suspense and not released until they receive all of their required documents.
They are Drilling an Oil Well Next to My Home. How Come No One Called Me?
If they are drilling on your land and no one called you, there are a couple issues. First, if you owned the minerals, they would have contacted you to lease your minerals. If no one contacted you, then there is a very good chance that you do not own the minerals. Second, as the mineral estate is the dominant estate, mineral owners can lease their minerals to an oil company, who now has the right to enter onto your property to drill. Basically, you can’t prevent them from drilling.
However, I have never heard of an oil company that DID NOT contact the surface owner first. And historically, even if the surface owner does not receive a lease bonus or royalties, the oil companies should always contact the surface owner and agree to pay for roads, fences, etc. that might have been damaged. The oil and gas lease signed by the mineral owner will require the operator to restore the surface to its original condition and pay for things such as loss of crops, etc.
Who Do I Talk to About Receiving Royalty Payments?
If you feel you should be receiving royalty payments, then you probably leased your minerals to an oil and gas company. You need to contact the company you leased to. They would be referred to in the Lease as the Lessee. Their name and address will be in the first paragraph of the Lease.
There is a chance that they no longer own your lease. In that case, they would have to record an Assignment of Oil and Gas Lease in the county where your minerals are located. You should call the County Clerks office and ask for their assistance in locating the Assignment. If they assigned your lease to another company, the name and address of that company will be shown in the first paragraph of the Assignment.
