I Inherited Mineral Rights, Now What?

Many people own mineral rights and never know about them until they get a phone call from a mineral acquisition company or oil and gas operator that is interested in purchasing or leasing those rights. Now that you know, what do you do?

Before making any decision, it’s important to determine what it is that you own. To summarize, minerals lie beneath the surface and are considered real property in many states, including Texas. As a mineral owner, one is able to sell, lease, explore for and/or develop minerals. Determining the value of minerals can sometimes be a time consuming task, and the value relies on multiple factors including where the minerals are located, the current market rate of oil, natural gas and the different types of oil or gas being developed.

As a mineral owner, you have the option to self-develop, lease, or sell your minerals. Many mineral owners opt to lease or sell their minerals. Leasing minerals involves a leasehold interest that is granted to an oil and gas operator (“Lessee”) by the mineral owner (“Lessor”). An oil and gas lease entails a primary term, usually ranging between three to five years. Many people believe that after the expiration of the primary term, the lease expires, but this is not always true. An oil and gas lease conveys a “fee simple determinable”, potentially allowing the lease to last forever if there is production as defined under the terms of the lease. The lease, however, may also be subject to automatic termination upon the occurrence of certain conditions, depending on what the oil and gas lease stipulates.

Another option available to mineral owners is to sell their mineral rights. Selling mineral rights involves a mineral deed which conveys a “fee simple absolute”. Mineral rights can be sold in its entirety indefinitely or for a period of time (i.e. for the remainder of someone’s life or for a term of years.) Sometimes, it may be in a mineral owner’s best interest to sell their minerals if they do not expect substantial royalties from leasing their minerals or prefer a lump-sum payment.

Before making any decisions regarding your minerals, it is extremely important to consult with a professional expert and learn more about the benefits of owning, leasing and selling your minerals.

Disclaimer: The above information should not be construed as legal advice. This information is based on opinion and knowledge of the writer and should not be used to substitute the need to consult with an attorney about your legal rights.