According to the Dallas Drilling & Geophysics Society, there are seven things a property owner should know about selling mineral rights:
- Know your Minerals. The term “mineral” can include oil, natural gas, coal, gold, copper, iron, metal ore, stone, gravel, sand and clay. Texas is best known for its oil and gas production and it has made a name for itself as the nation’s biggest producer of oil and natural gas. If you live in Texas, it is important that you know what other minerals may be under your surface besides oil and gas.
- Know What You Own. If your deed says “fee simple,” then this will mean that you have rights over whatever minerals you have on or underneath your property. However, if your deed states “less and except” or “subject to,” then you might not own everything.
- Know What You’re Selling. Make sure you understand what the contract specifies – a lease which could expire, or sell mineral rights Your contract will tell you whether you could either get a lump sum, or be paid as the minerals are extracted.
- Know Your Surface Rights. After making a sale, you still retain “surface rights.” This means that you still own the surface of the property; however, the right to minerals underneath now belongs to someone else. Under the law, surface rights are “subservient” to mineral rights, which means the mineral rights owner gets priority consideration.
- Know What to Watch For. There will definitely be a few unscrupulous companies out there. Thus, do not accept the first offer you get. Pay attention to fine print as well and make sure you consult with an attorney before signing contracts or cashing checks.
- Know What It’s Worth. It may be important to know the market value of mineral rights as this will help you determine how much your mineral rights should cost.
- Know Your Limits. How much you will receive from selling your mineral rights should not be your only consideration (unless you intend to live elsewhere after making a sale). It may also be important to know the impact of the extraction methods, like the noises you will have to put up with or the work ethics of the company you have done business with.
Selling mineral rights presents many advantages, some of which include:
1. Cash up front – this is advantageous, especially for landowners, who are financially in need, since selling mineral rights means securing a lump sum immediately. Some firms do offer an amount big enough to last for many, many years.
2. Taking advantage of the great demand – booms in oil, gas and other minerals have come and gone across the nation, so that what may be appraised with a very high value today may no longer be worth anything tomorrow.
3. Saving oneself from time-consuming concerns and significant tax increases – keeping track of one’s mineral or royalty earnings and the taxes these are associated with plus the need to keep division order files, depletion schedules, property tax records, etc., always requires much time and attention. Selling, however, may not only qualify the owner for tax savings advantages, but he or she can also use part of the proceeds from the sale to invest in less risky business opportunities
4. Saving the owner from the risk of a non-productive property – once the owner decides to sell, whether the property is productive, less productive than expected or not productive at all, is no longer his or her concern, but the buyer’s. Especially if the property is not really promising as it was deemed, selling, then, is a decision that will perfectly benefit the owner of mineral rights.