Selling Your Mineral Rights? Here Are 7 Things You Should Know

If you’re considering putting your mineral rights up for sale, there are several aspects of the process that you should know before any agreement can be made official. Talk to an attorney before agreeing to any deal so you can get a full explanation of the true worth of what you own. Here are seven things you need know about selling mineral rights.

What are mineral rights?

Mineral rights grant the holder the option to extract minerals from underneath the earth. Some of the most sought-after minerals include oil, natural gas, coal, iron, copper, metal ore, stone, gravel, clay, and sand.

One of the nation’s biggest producers of natural gas and oil is Texas. This state’s more popular sites for mineral extraction are the Eagle Ford Shale and the Permian Basin. If you reside in this area, you may be sitting on top of a very valuable asset. However, keep in mind that you might have other quality minerals underneath the surface of your property besides oil.

What minerals do you actually own?

There are several questions that need to be answered before you can extract any minerals off a property. First, you must ask yourself if you’re the actual owner of the mineral rights and what the deed to you says about your ownership. Most legal documents will show that ownership goes with the landowner, so it’s probable that your deed states “fee simple,” which guarantees that you own the mineral rights.

However, if the wording on the document states “less and except” or “subject to,” then you may not own the mineral rights outright or you might own less than all of them. Consider hiring a mineral rights title expert who can verify ownership and which party can legally sell or lease the rights on the open market.

Know what minerals you want to sell

Minerals aren’t actually owned until they have been brought to the earth’s surface. What is being sold is the rights to access and extract those minerals from the ground. The signed agreement might include a lease that could expire or force you to sell the mineral rights at some point in the near future. If you want to sell, try getting a lump sum or a combination of money and extracted minerals in the final deal. It is important to consider all of the options available to you and get a better understanding of your rights. Your options include granting access to the surface, conveying rights, and renewing, extending, or delaying rentals and royalties. And of course, you can always consider keeping your minerals and negotiating a lease of them so that an oil and gas operator can develop them in exchange for bonus and royalty payments.

What are surface rights?

After the sale becomes official, you still retain the surface rights, which is exactly as it sounds. You still own the surface of the property, but the rights of the minerals underneath the ground could belong to another party.

By law, surface rights are independent or separate from mineral rights, which guarantees the mineral rights owner has priority over all matters in question. State law does require mineral rights owners to have some form of protection. You may want to add additional provisions into the written agreement to protect your surface investment because of this.

What to watch for when selling mineral rights

You must be aware of unscrupulous business practices like not offering true market value in any potential offer to lease or buy your minerals. It is important to never accept any parties’ first offer to buy your mineral rights because of practices like this. The offer might be very tempting, but have an attorney take a closer look at the finer points of the proposal before signing any binding agreement.

Know what you mineral rights are worth

The open market often determines the true value of mineral rights, so research recent transactions in your area. This will help to identify what factors influence the market price. Your research could include the size of the property, the size of the mineral deposit, and the amount of producing/non-producing mines in your area. You should also look into current commodity prices, and current or future exploration projects. All of this information needs to be sorted out before you sell your mineral rights. You may even want to consult with a petroleum industry professional such as a geologist or reservoir engineer concerning the value of your minerals.

Other things to consider when selling mineral rights

Selling mineral rights can often mean getting a large sum in return, but that shouldn’t be your only goal. You should also consider the environmental impact of the buyer’s extraction project. If you live on the property that you’ve sold the mineral rights from, think about the amount of noise that will occur each day. The ethics of the buyer may help you make a choice as to whether this is right move to make. All of these questions should be addressed before negotiations take place.

If you are interested in selling your mineral rights, contact the Oil and Gas attorneys at Brown & Fortunato, P. C. today. You can call us at (806) 345-6300 or Contact Us via email to learn more about our Practice Areas which include attorneys practicing mineral law in both Texas and Oklahoma. You can also visit our offices at 905 S. Fillmore Street, Suite 400 in Amarillo, Texas.