Your thoughts on mineral rights

Rod

Many of these grantees accepted offers from speculators for various rights. Some of these people were farmers/ranchers who didn't do their homework... they never spent the time to learn about oil, gas, coal, minerals. So they took pennies per acre for their rights thinking it was "free money".

Subsequent owners, like you, bought the land without the rights. That was your choice. If you don't like it, next time you buy land, study the deed at the courthouse and make sure that all "rights, title, and interest" convey with it.

We had a constitiutional change here in Kentucky a few years ago. Back in the early 1900's a lot of people sold land under 'broad form deeds' where they sold all of the mineral rights. The only mining done then was deep mining. Now, with the advent of strip mining they were destroying the surface. Deeds were changed to where they could only use the extraction methods common in the day the deed was written.

Another example of somebody tryin' to rip the landowner!

If we could all get together and never buy another piece of dirt without the mineral rights going along, maybe somebody, somewhere would then drop this practice.

It burns me too!!

Allan

I deal regularly with mineral rights in Texas and occasionally in Louisiana.

I'll try to address some of your questions.

In Texas, you start out with what is called the "fee simple estate". In a fee simple estate the owner has ALL of the rights associated with the land. This includes anything that can be done with the surface or the subsurface.

The owner of a fee simple estate can convey that estate with reservations. The owner retains certain rights to the estate. These rights could be timber, water, oil, gas, coal, gravel, iron, whatever.

When a conveyance is made and a mineral interest is reserved, in the conveyance with the original reservation an easement is created that renders the surface estate servient to the mineral estate. This allows the mineral estate rights owner access to the minerals.

Unfortunately, because this easement is created in a contract between two individuals, any dispute between a surface rights owner and a mineral rights owner is automatically a civil matter.

With the easement created, the mineral rights owner does have the right to "reasonable use" of the surface to extract the minerals. Unfortunately, if the surface rights owner believes the the surface use by mineral rights owner is unreasonable, the only recourse is in civil court if negotiations with the mineral rights owner fail.

With respect to the issue of land valuation increasing on the surface owner after oil and gas development takes place, please make sure that this valuation increase is not due to some other matter, such as increasing valuation of surface properties in the area.

If you are a surface owner with no mineral rights to land and mineral development does take place, you can have the acreage that you pay taxes on reduced. What has happened is that the owner of a superior easement on your land has done, has converted your use of the land to his use of the land. If you can document that the mineral owner has taken use of your land (for example, through a survey of the land used by the mineral owner) you can have your taxable acreage reduced. For example, you own the surface rights to 200 acres. The mineral owner develops oil and gas on the land and uses a total of 10 acres for the oil and gas activities. You can then have your taxable acreage reduced to 190 acres as you no longer have use of that 10 acres.

I did this on a piece of property that my family has in Texas when we granted an easement for a power line. Since our activities are limited on this portion of our land, I was able to have our valuation reduced.

A reasonable oil and gas operator will usually automatically pay liquidated damages to a surface owner when oil and gas development takes place. My experience has been to typically pay what the value of the land is for the land that I am using. My typical offer is, that I am using one acre, your land is worth $X per acre, here is $X.

I do want to point out, that to me, my relationship with non mineral surface owners is very important. The last thing that I want is an upset landowner.

With regards to taxation of minerals, generally in Texas no taxes are assessed unless there is actual mineral production. An ad valorem tax is assessed on the value of the minerals extracted as well as the equipment used to extract the minerals.

If there is active mineral production and the ad valorem taxes are not paid, then a sheriff's sale can be held in order to obtain the taxes owed. Just like a sheriff's auction on someone's house where the ad valorem taxes have not been paid, the same situation exists for producing mineral rights. Most oil and gas lease agreements in Texas allow the lessee to pay the lessor's ad valorem taxes if the lessor is in default on the ad valorem taxes. We regularly check this.

Now for Louisiana.

In Louisiana, minerals cannot be severed from the surface estate unless there is active mineral production. After a period of time of no mineral production (it is either 7 or 10 years, I can't remember which right off the top of my head), the mineral rights revert back to the surface owner.

Sorry to be so long winded, but it is a complex problem.

Hope this helps... and just remember, please don't shoot the messenger.

PKurilecz

As far as these attachments go, talk to an attorney who is experienced in oil and gas law.

If the minerals are severed from the surface estate, yes the mineral owners can extract the minerals. It is not necessarily done at a whim. It is only done if it can be profitable.

It is my understanding that what consitutes "minerals" in Texas is somewhat unclear. It is my understanding that the legal theory is what is known as the "surface destruction" test. If the extraction of the mineral is such that the surface is destroyed and the surface rights owners use of the land is unreasonably impaired, then those minerals are attached to the surface estate and not the mineral estate.

For example, suppose there is a vein of lignite 65 feet below the surface of the ground. A broad mineral rights reservation exists previously in the chain of title. To recover the lignite would require strip mining the land. It is my understanding that the mineral rights owner would not be able to extract the lignite as the strip mining operation would destroy the surface. But then again in Texas, it also depends on how good your lawyer is. As far as I know the issue is not fully resolved.

Some theories that I have heard are based on the concept that the original grantor reserved the "minerals" did so because they thought that oil and gas might exist.

One other general thought. If you are purchasing land from someone who owns a fee simple estate and the grantor wants to retain the minerals, you don't have to accept the wording of their reservation. As in any transaction, it is all subject to negotiation.

Hope this helps.

PKurilecz

Knew of land here (Va) with old oil&gas easements owned by a company in La. They knew nothing about them and cared less. All it took was a couple of letters to remove the easement, for all time. Method will vary with state law.

I would feel sorry for anybody who puts there hard earned money into a place, not realizing it can turn into an industrial park on them. Then there's the possibity of a spill. Disclosure should be mandatory up front, not let the buyer beware. I would walk far away from a deal like this.

I highly recommend that you have an attorney who is well versed in oil and gas law review your conveyance document to ensure that the wording on the mineral reservation and servient easement creation is done correctly.

Also make sure that your interests are properly recorded in your County"s Deed Records.

I cannot begin tell you of the number of times that I have had to abandon an oil and gas project in Texas because I could not determine the owners or because of a poorly worded document in the chain of title.

Hope this helps.

PKurilecz

I wouldn't buy land without full ownership or with easements except for low voltage power lines. You wouldn't sell me land that i bought and paid for and retain any right to it. I hope their are disclosure laws in place that a buyer must be informed in writing of previously sold rights--right at the real estate office or before it is shown to a buyer by a seller.

I wouldn't buy land that way either.

All the people we elect to make laws are mostly lawyers, and we can never expect to have laws and disclosures written in plain english as long as they make the laws. Like the guy getting rich advised the other above, you need an attorney..... ..that's how they maintain their advantage.

Now you can get a title search company to handle real estate closings in some states like FLA, and cut out the attorneys fees. Finally some sanity and common sense, unfortunately limited and not nationwide.

For me, when buying land, I recommend asking the seller exactly what is being sold. Is it fee simple? What is being reserved? What easements exist?

Getting a copy of the seller's deed is very easy. I know in Texas, I can go to the County Courthouse and look it up in the Deed Records. For a dollar per page, I can get a copy.

I don't know if the remark about the "guy getting rich" was directed at me or not. If it was, I can assure you that I am not. I make a living at. Right now, I drive an 18 year old pick up with 260,000 miles on it and my wife is nagging me to replace it. My feelings are, it doesn't look great, but it runs and the wheels haven't fallen off just yet. Besides, if they do, I'll just have to put them back on and hope that they don't fall off for a while longer.

I remember one project that I had where I was trying to determine the mineral ownership on a piece of land in Texas. The land had been cut up, subdivided, combined with adjoining acreage, subdivided again, and combined again with different acreage. The original tract of land with the mineral reservation dated from about 1905. I spent about six weeks in the Deed records tying to find out who currently owned the mineral rights. In the end I had to give up on the project, because I could only identify about 35% of the mineral owners. Income during that period: $0

Hope all is well for you.

PKurilecz

If I want to buy land, it's my responsibility to determine what I'm considering buying. There's nothing to prevent anybody from going down to the courthouse and reading the deeds. If you prefer to spend the money to get somebody else to do it for you, fine. I don't. They're in English and if it says something about minerals, gas, oil, pay attention. Just like you would for any other easement.

I've heard lots of complaints about buying land with recorded easements. Always from people who can't be bothered to either read the deeds or pay somebody else to.

Matters little who handles the closing. Not unlike buying a used vehicle. You still have your responsibility. Shirk it at your risk.