Insight For Mineral Rights Owners
Are you one of millions of mineral owners in the United States? If so you likely have a stake in the complex world of oil and gas. MineralWise is here to help you with professionally written educational articles to maximize the potential of your mineral rights.
If you would like to discuss oil & gas mineral related issues with other landowners visit our popular Mineral Rights Forum.
Questions about mineral rights?
Click the link below that best describes your situation:
- My mineral rights are leased and producing
- I am an unleased mineral rights owner
- My mineral rights are leased but not producing
- I just received an oil or gas lease proposal – what’s next?
- I am interested in a cash payment for my minerals
Mineral Rights and Surface Rights
Mineral rights can be described as the unseen value associated with a tract of land. Historically, land was transferred among owners with the royalty rights co-mingled with the surface rights. As oil and gas production began in the U.S., these rights started to be viewed independently. If mineral rights are severed, i.e. the process of separating mineral rights from the surface rights, a new and separate chain of title for the minerals begins.
Separate ownership of mineral rights and surface rights can sometimes cause confusion. With respect to oil and gas production, the owner of the surface rights has limited input as to whether oil or gas is produced from underneath his property. If production is established, a portion of the value is paid via a royalty fraction (i.e. percentage) to the mineral rights owner.
Leasing Your Mineral Rights
If a landman comes knocking at your door, it’s wise to know a few things before signing an oil and gas lease. Here are two articles that will help you negotiate your oil and gas lease. The first, Oil and Gas Leases: Top Ten Things Not to Do describes some of the mistakes owners make and how you can avoid them. The second article, Oil and Gas Leasing: Top Ten Things to Do illustrates how you can pursue the best deal for your mineral rights with regard to your lease bonus payment, royalty percentage, and other important lease provisions. Learn more about the process of oil and gas production in the article Oil and Gas Production in Nontechnical Language.
Mineral Rights Taxes
Minerals can be taxed both at the state and county level
As with other assets, royalty rights come with a tax liability. These tax burdens vary depending on whether the minerals are being produced or not. Minerals can be taxed both at the state and county level, in addition to your Federal tax obligation. The County Ad Valorem Tax is generally levied only on producing minerals. There are several ways to mitigate tax impact including the Depletion Allowance and 1031 Exchanges. The article Royalty Tax provides answers and links to common questions oil and gas royalty owners have about mineral right taxes.