Any oil tycoons around here?

[sportage]

Wondering how owning mineral rights works?
Can you still own the rights without owning the land?

Just found out our family on my mothers side, a sister of my mother, owned 80 acres of mineral rights out in N.D.
She passed away a while back.
My mother is the only living survivor.
Now, they want to drill.
"They", being a company wanting to lease the land.
Why no drilling until now I have no idea.
A lot of legal documents suddenly flying back and forth.

So far, that's all I know.
.
.

 

[crab]

Everyone is. It's a requirement for membership.

 

[kranky]

Yes, you can own mineral rights without owning the property itself.

Here's a good primer on how things work: http://geology.com/articles/mineral-rights.shtml

 

[twinrider1]

My big question is about oversight. Ok, you sign over mineral rights and the company sends you a check every year. So you're supposed to trust them to tell you how much oil/gas they pumped out of your ground? Yea, right.

I get pissed just thinking about it.

 

[kranky]

I don't think they lie about how much they extract. Most places have a meter right at the wellhead. They don't need to lie because they are quite adept at finding ways to charge you "expenses" to reduce the payout.

Company A pays you to drill on your land. You get a 15% royalty on sales. But expenses are deducted from the royalty.

Now Company A pays Company B to transport the gas = expense. (Note: Company B is usually owned by Company A).

And Company A has a lot of marketing expenses they pay to Company C (Note: Company C is usually owned by Company A).

And Company A uses a lot of gas for powering its own facilities that process gas and oil. That gas wasn't actually sold, so no royalty for you.

Sometimes Company A sells gas to Company D at a nicely discounted price. Your royalty is based on that discounted price since that's what Company A sold it for. Company D sells it at full market value. (Note: Company D is usually owned by Company A).

See how it works?

 

[MagnusTheBrewer]

Still working on consolidating my dental floss holdings.

 

[Sattern]

Make sure you tell her to negotiate further because they will pay extra if you refuse just to get the oil out of your yard.

 

[Markbnj]

My brother is VP of business development for an oil and gas exploration company. He told me a story about a guy in Texas who was given a 100 acre ranch by an elderly owner who had no heirs. They found oil on it, and that former ranch hand now gets $7m per month in what the industry calls "mailbox money." Pretty sweet. So OP, you'll be taking us all to dinner at least?

 

[Strk]

Wondering how owning mineral rights works?
Can you still own the rights without owning the land?

Just found out our family on my mothers side, a sister of my mother, owned 80 acres of mineral rights out in N.D.
She passed away a while back.
My mother is the only living survivor.
Now, they want to drill.
"They", being a company wanting to lease the land.
Why no drilling until now I have no idea.
A lot of legal documents suddenly flying back and forth.

So far, that's all I know.
.
.

Because most of the oil coming out of ND now is from fracking, which isn't that old.

 

[T9D]

What really sucks is if you own land you usually don't own the mineral rights. Someone else does.

 

[Hugo Drax]

Wondering how owning mineral rights works?
Can you still own the rights without owning the land?

Just found out our family on my mothers side, a sister of my mother, owned 80 acres of mineral rights out in N.D.
She passed away a while back.
My mother is the only living survivor.
Now, they want to drill.
"They", being a company wanting to lease the land.
Why no drilling until now I have no idea.
A lot of legal documents suddenly flying back and forth.

So far, that's all I know.
.
.

Don't waste your time asking on this forum. Hire an attorney that specializes in that field and has good references.

Or you will get raped without the lube.

 

[Red Squirrel]

What really sucks is if you own land you usually don't own the mineral rights. Someone else does.

Yeah I always found that was BS. If you own land the land should be 100% yours to do whatever the hell you want. If you want to build a farm you should be able to build a farm, if you want to mine, you should be able to mine, etc.

Then again some places in the US are even worse than the standard BS, such as places that don't even allow you to collect rain water or sunlight, or tax you on it whether or not you use it. Crazy the bureaucracy and removal of rights that happen these days.

 

[Oil]

Sup

 

[Wreckem]

Yeah I always found that was BS. If you own land the land should be 100% yours to do whatever the hell you want. If you want to build a farm you should be able to build a farm, if you want to mine, you should be able to mine, etc.

Then again some places in the US are even worse than the standard BS, such as places that don't even allow you to collect rain water or sunlight, or tax you on it whether or not you use it. Crazy the bureaucracy and removal of rights that happen these days.

You only get what you buy. If you only buy the surface estate you only get the surface estate.

 

[Wreckem]

I don't think they lie about how much they extract. Most places have a meter right at the wellhead. They don't need to lie because they are quite adept at finding ways to charge you "expenses" to reduce the payout.

Company A pays you to drill on your land. You get a 15% royalty on sales. But expenses are deducted from the royalty.

Now Company A pays Company B to transport the gas = expense. (Note: Company B is usually owned by Company A).

And Company A has a lot of marketing expenses they pay to Company C (Note: Company C is usually owned by Company A).

And Company A uses a lot of gas for powering its own facilities that process gas and oil. That gas wasn't actually sold, so no royalty for you.

Sometimes Company A sells gas to Company D at a nicely discounted price. Your royalty is based on that discounted price since that's what Company A sold it for. Company D sells it at full market value. (Note: Company D is usually owned by Company A).

See how it works?

Your last scenario would end up getting company A raped in court.

Royalties are us usually in 1/8ths or fractions of 1/8ths. Royalties are usually free of production expenses. Post production expenses can be deducted if that was what was negotiated. Usually it is not. Most royalties pay based on market rate at the well head, not the actual revenue from it actually being sold. That includes anything that is pumped so scenario 4 isn't valid.

If someone takes a working interest, rather than a royalty, then yes expenses are going to be taken out from the persons share.

 

[SandEagle]

be careful OP. there are some here who will steal your land for the oil

 

[IronWing]

You only get what you buy. If you only buy the surface estate you only get the surface estate.

This. With split estate lands, people tend to forget they either paid less for the land or got paid for the mineral rights at some point.

If you want to see a total cluster unfold, watch someone stake mining claims on a built out subdivision where the lot buyers didn't do their due diligence.

 

[kranky]

Your last scenario would end up getting company A raped in court.

But they don't go around telling the landowners that's what they are doing.

 

[sportage]

Yes, my siblings have had several attorney's involved.
They know a lot more about this than I care to.
And both are quite savvy when it comes to legal matters.
And both quite successful business owners.
So, when I've been required to produce something, I simply cooperated.
A certified birth certificate was the latest requirement.
It had to be an actual state certified, raised state seal, document. Not a copy.
My attitude is, what ever happens will happen.
And I never expected anything like this. Quite strange indeed.
But with this new little adventure, we shall see.

I simply posted the thread to get some input, if there was any to be had.
Not so much what should I do, but more so can you imagine this happening?
And I still have to wonder why my deceased Aunt would not allow her land to be touched while she was alive. No one has an answer to that.
She was a simple woman, and a hard core conservationist, who owned 80 acres in N.D. with mineral rights.
Seems a little cold hearted for all this to come down, now.
Speaking of turning over in ones grave.

 

[Scarpozzi]

Don't sell mineral rights to your land. It's not even been 20 years and you've already forgotten what happened to Bayside!

 

[Fritzo]

I have an oil raccoon hanging on my wall. Does that help?

 

[manimal]

I used to play roller coaster tycoon

 

[herm0016]

We have been fracking for over 50 years.

 

[Newell Steamer]

I am certainly not - but, I briefly glanced through all the replies (no I didn't) and I know you are all wrong.

::strokes neck beard::

 

[poofyhairguy]

Wondering how owning mineral rights works?

The quick and dirty is you own the rights to minerals (water, oil, gas, etc.) below the ground. Above the ground are surface rights.

Often in a US well the mineral rights are divided between many parties.

Can you still own the rights without owning the land?

Yes. And a royalty holder is entitled to a percentage of the revenue even if they don't contribute to the development of the well.