Owning mineral rights can be an exciting and rewarding endeavor that can add an additional source of income for families. Like other investment opportunities, mineral rights ownership offers people a chance to build wealth that can be passed on to generations in the future.
However, we have all heard stories about how owning mineral rights can be confusing and sometimes overwhelming, especially for beginners.
Maybe you know someone who has owned minerals for decades and is accustomed to seeing royalty checks arrive in the mail, but when asked about their mineral rights ownership, he or she really doesn't know much else about the property. As long as the checks keep coming, they do not ask questions.
Another scenario is that people find out one day that they are heir to mineral rights because a distant relative passed away and left mineral rights in a trust that was created in the 1960s. The trust has been passed down through the family to previous heirs who are now all deceased. The paperwork for the trust is disorganized, and it is unclear who owns what percentage of the property. In addition, the property is located out of state which only makes the mineral rights ownership more challenging.
These situations can seem rather daunting, and, honestly, sometimes they are. If you find yourself new to mineral rights ownership, where do you start? Fortunately, there are steps you can take to find and keep track of the information you need to help you care for your asset responsibly.
Learn About Your Property
Learn as much as you can about your property and the area where it is located. What is the acreage? Are there other producing properties in the area? If you are not sure about what you own, you can search for records about the property and any royalty history it may have. Some places you can contact to find out more about your property include:
- State oil and gas regulatory agencies
- State Comptroller’s office for tax records
- Local county clerk’s office title deeds
- Enverus.com (a commercial company)
If you do not live near the location of your mineral rights property, you can also contact us at Tower Rock Oil & Gas for the current rates in that area.
Get Help with Lease Agreements and Division Orders
If the property you own has an active lease, it is very important for you to understand the terms of the agreement. Oil and gas leases are important and are not be confused with division orders which are not meant to alter the terms of a lease. According to John McFarland in the Oil and Gas Lawyer Blog, “The main purpose of a division order is to protect the payor of the proceeds of production from double liability.” It is worth seeking the advice of an attorney who will help you understand the terms of the division order and the lease which may change if your property stops producing.
In his Mineral Management 101 video series, Jerry Simmons of the National Association of Royalty Owners (NARO) says, “You need to know what the future impact of the oil and gas lease/division order will have on your royalty payment.” There are different division orders depending on the well being drilled, and you need to know the specifics about any lease contracts and division orders involving your property.
Keep Good Documentation
Keep your documents organized and in good order. Make copies of all original documents. If your property has been passed down through the family over several generations, you may not have much documentation. Contact your local county courthouse to see if you can order copies of documents pertaining to your property.
Ask a Professional
Managing your mineral rights properly involves time, effort, and research. Even after doing your due diligence in managing your property, you may need to seek the advice of a professional. Know when to ask for help. Questions come up, situations change, and new developments occur. During those times, you may need to hire a landman, a geologist, an engineer, or a mineral rights company to help.
Your mineral rights property is a valuable investment for you and your family. You must actively give it your attention. Avoid being passive about your property and manage it wisely. You will be glad you did.
McFarland, John. 2011. “DIVISION ORDERS: WHAT YOU NEED TO KNOW.” Oil and Gas Lawyer Blog. April 30, 2011. https://www.oilandgaslawyerblog.com/division-orders-what-you-need.
Simmons, Jerry. n.d. “National Association of Royalty Owners - Mineral Management 101.” Www.Naro-Us.Org. Accessed September 13, 2020. https://www.naro-us.org/Mineral-Management-101.