mineral right offset production

We cannot see most oil and gas reserves from the surface of the earth. However, there are many ways in which people can make educated decisions about where to search for resources. There are the tools and technologies of today. One of the most telling ways to estimate a mineral claim’s potential is to fully analyze the land. This is in the immediate vicinity of the plot in question. This is what this expanded glossary guide is all about. We will answer the whos, whats, wheres, and hows regarding mineral rights offset production. This also includes the operation and permitting of oil and gas.

What is Neighboring Offset Production in Oil and Gas?

In the mineral rights industry, neighboring plots of land are “offset areas”. Offset areas have separation on their individual property dimensions. These are most commonly have designation on the surface of the earth, divided among surface rights owners.

Offset production is the exact measure of the performance of a neighboring parcel of land. Production may be quantified for recent months. Usually given as a figure representing the land’s total production value. Then Over its complete time in active mineral rights contracts and productions.

What is an Offset Well?

Offset wells are used to learn information about individual drilling points. Points that are both on the same parcel of land as well as neighboring tracts. High-quality data received from offset wells help operators determine whether or not a site is financially feasible. For this reason, offset well data may not be shared among rival operations. On the other hand, providing a wealth of knowledge internally for partnerships and large organizations.

Why is Offset Production Important?

Offset production is the most telling sign of whether or not active mineral exploration is necessary. Proper planning and execution based on offset production help operators benchmark their progress. From there, they can plan operations both immediately and down the line. Production numbers are often on pair with seismic data. Then to other real figures to help paint a greater picture of offset activity.

What is an Offset Operator?

An offset operator may refer to any current, past, or future known operator of an offset well. Operators in this context can refer to both individuals and entities, legally represented as members of a production team. Operators are responsible for both exploring and reporting their progress. They are very much held accountable for the estimated and actual production of any given resource extraction.

How do Offset Drilling Permits Work?

As necessary in all drilling processes, a permit is a requirement for offset mineral extraction. Oftentimes, a successful well will likely lead to area intelligence. Therefore neighboring wells may be next in line for extraction and production.

In cases like this, operators need to file special offset drilling permits with the necessary personnel. Offset drilling sites may be located in areas where mineral rights owners are separate from previous operations. In cases like this, new mineral leases may become a requirement for an operation to expand to offset territory.

Offset Obligations and Requirements

Offset obligations are common for all mineral rights owners. Especially those selling their property or entering into a mineral rights lease agreement. Moreover, obligations and requirements are put into place to protect mineral rights owners. Usually from third-party drilling and extraction from neighboring operators in neighboring wells.

New technologies have made it possible to laterally and diagonally drill into subsurface reserves. That’s why offset obligations prevent a subterranean trespasser from profiting off of stolen resources. If requirements are not observed, penalties and fines will vary depending on the location and severity of the offense.

Pooling and Unitization of Offset Areas

In some instances, all parties can benefit from the pooling or unitization of the offset area. What if an oil reserve is currently under extraction from one surface well? Then, it may not be necessary to drill another well. Instead, financially and environmentally, it may be best to combine the land into one designated reserve. It will be under division among owners. Pooling and unitization can help property owners earn further royalty payments. Or another option is a one-time lump sum after a mineral rights sale.

Summary on Mineral Rights Offset Production

Successful oil and gas operations typically invite all of those involved to further explore. This involves the possibility of more extraction in neighboring wells and landmasses. It is true that offset areas can be under protection by requirements and obligations. On the other hand, neighboring owners are typically able to sell or lease their mineral rights. This usually happen when working with offset operators. Truly, illegal fracking is still a problem in some areas of the country. On the brighter side, offset exploration has enormous potential for those who do it legally.

If you have more questions about mineral rights, reach out to us here.

 

mineral ownership

In the United States of America, private citizens, governmental bodies, and private entities can all own mineral rights. This is not the case everywhere around the world. Americans are lucky enough to both own and potentially profit from mineral ownership.

In this complete glossary guide, we will define mineral ownership in today’s modern context before expanding on some of the other key terms to understand mineral rights.

What is Mineral Ownership?

For oil and gas companies, mineral ownership does not refer to your engagement ring or rock collection. Instead, mineral ownership in the context of mineral rights is the legal right to extract, use, and sell minerals. These are minerals that are below the surface of the earth.

Here, minerals exist naturally in the earth. Basically, owners are free to either leave them be or extract them to the surface. Mineral ownership is most relevant in energy-producing resources such as oil, gas, and coal. Additionally, precious metals such as silver and gold can also be very valuable to mineral owners.

What is a clear title for mineral rights?

A clear title for mineral rights is a legal guarantee. A guarantee that a single person or entity has the entitlement to full mineral ownership. Clear titles are undeniable as they are completely free of liens, levies from creditors, and evidence of any third-party ownership.

Whenever multiple parties claim ownership of an individual mineral rights property, then a clear title is the best evidence possible. Titles or deeds with ongoing and past judgments are not under consideration as clear titles for mineral rights.

What is a mineral deed?

As a mineral rights owner, a person, government, or organization will physically possess a mineral deed. It is much like the deed to a house or the title of a car. A mineral deed is one that is filled with local agencies. It is used to showcase the clear ownership of mineral rights on the property.

Oftentimes, a mineral deed may not exist for a property that has not been split between multiple owners. In cases like this, a fee simple estate deed is going to cover complete ownership. This includes both the land and the mineral rights of a property.

What does it mean to own a mineral interest?

A mineral interest ownership is a term that is sometimes useable in place of mineral rights ownership. Anyone that owns any part of a resource extraction operation will have a mineral interest in the extract. It also includes the use or sale of the minerals. For this reason, mineral interests are often confusing with royalty interests. These are earned by companies and individuals that aid in the extraction process for their cut of profits.

Who owns the mineral rights to the property?

It depends on n fee simple estates or total property ownership scenarios. For example, the surface rights and the mineral rights of a property will share the same owner. How about the large, desolate oil fields of some of the United States plains? Surface rights and mineral rights are now often due division between multiple owners in a split estate.

Legally, surface rights owners must adhere to the reasonable demand of mineral rights owners. This is in order to explore and produce valuable subsurface resources. Surface-right owners may be incentivized to sell the portion of the property. They benefit from the process with ongoing mineral royalties.

What happens if you don’t own mineral rights to your property?

Typically, nothing will happen if you don’t own mineral rights to your property. Although the subsurface of your property may be being traded or sold among changing owners unbeknownst to you. It is very unlikely that a split estate will require the input of the landowner unless drilling were to begin.

In cities and suburbs across the country, most landowners should not be concerned about this. Whether or not they own mineral rights to their property is not an issue.

Can you own mineral rights but not the land?

Yes. That is if you would like to retain your mineral rights ownership after the sale of land. It’s just that your efforts must be reflected in the contract. Legally, it is best to work with a mineral rights broker in case of any issues. However, the process of retaining mineral rights is very simple.

How do you keep mineral rights when selling the property?

Essentially, all that needs to be included in your contract is a declaration of your mineral rights retainment. So long as both you and the new buyer have agreed on and signed with these terms, then your mineral rights will not transfer with the property and will legally remain in your possession.

Conclusion

In many ways, mineral rights owners never really experience true mineral ownership. As the resources either sit below the earth or are extracted and sold off-site. It is technically possible to drill for oil and gold for our own personal consumption. Moreover, most mineral rights owners will enter into mineral lease agreements. This is to best receive compensation for their subterranean assets.

If you have further questions about mineral rights ownership, reach out to us here.

Mineral Interest vs. Royalty Interest

When entering into a mineral rights agreement, it is very important to understand the complex definitions. This includes many industry terms. What could be the result without a proper background in mineral interest terminology? Investors run the risk of exchanging an asset or participating in a contract far less valuable than the property itself.

In this quick guide, we will define and compare mineral interests vs royalty interests, mineral vs royalty acres, and several other commonly used terms to clear up confusion and provide guidance for mineral rights investors.

What is a Mineral Interest?

A mineral interest is the absolute ownership of all minerals below the subsurface of a property. With rights to mine, exploit, or produce any and all resources. Mineral interests are also mineral rights or subsurface rights.

With mineral interests, property owners have the permission to execute conveyances and enter into agreements. This includes with third parties to explore, extract, or sell the minerals. With this, mineral interest owners can earn mineral royalties. This is usually from the sale of valuable resources such as oil and natural gas.

Mineral Interest vs Royalty Interest

Mineral interests are the real assets that can be under the ownership of individuals and entities. Royalty interests do not represent physical properties. Unlike mineral interests, royalty interests are the lease terms that outline a mineral rights owner’s share of production profits.

Before entering into a mineral rights lease, it is critical to understand the terms of the royalty interest outline. This is to evaluate the quality of the contract. It is also possible to earn royalty interests without owning mineral interests. Unlike mineral interests, royalty interests can be claimed. This is if a person or business is involved with the exploration or production of any valuable resources.

What is a Mineral Acre?

A mineral acre is the square measurement of any landmass that has minerals beneath the surface. Mineral interests are quantified in mineral acres, which can be measured as roughly 640 acres of ordinary land. Within a mineral acre, the land is divided into both net mineral acres and gross mineral acres.

Net Mineral Acres vs Gross Mineral Acres

A net mineral acre is equal to the exact amount of subsurface land that a mineral interest owner or oil and gas operator can exploit for the extraction and sale of the resources. In large oil fields and plots of land with multiple mineral rights owners, it is very rare for net mineral acres to be equal to gross mineral acres.

Gross mineral acres are the total number of mineral acres in any subsurface property discussion. Looking over a division of land, gross mineral acres are only equal to net mineral acres if one individual or entity owns all of the mineral rights. Net mineral acres may also be less than gross mineral acres. This is if a portion of the land has been protected, reserved, or previously exploited.

Net Mineral Acres vs Net Royalty Acres

Much like in the cases of interests, there are a few key differences when we compare mineral acres vs royalty acres. Net mineral acres (or NMA for short) represent real property, whereas net royalty acres (NRA) are terms in a mineral rights lease that outline cash flow.

In mineral rights leases? the average mineral royalty rate is roughly ⅛ of the sale of oil, gas, or another resource. With this, for every net mineral acre, one can expect about ⅛ of the gross mineral production to be equal to their net royalty acre.

Net Royalty Acre Calculation

As an example, for net royalty acre calculation, let’s say that you own 500 net mineral acres. Then you have entered into an oil and gas lease agreement with a full-service provider. First, take a look at your royalty interest rate as expressed on your contract. Next is to multiply it by 1/8 (or 0.125). In this example, we will use 10% as your royalty rate. Which when multiplied by 0.125 will equal 0.8. This would be your royalty interest rate.

Finally, how to calculate your net royalty acres?

Take your royalty interest rate (0.8) and multiply it by your net mineral acres (500) to equal 400. With 500 net mineral acres at a royalty rate of 10%, your net royalty acres would be 400.

Final Thoughts

This is what new investors and seasoned property owners alike are well aware of. Mineral rights terminology can be confusing and occasionally intentionally deceiving when practiced by an unreputable company.

Do you need help to navigate the unique differences of net mineral acres vs net royalty acres? How about mineral interests vs royalty interest? Learn more about your mineral lease agreement today. We strongly recommend working with a mineral rights broker or an oil and gas industry legal specialist.

If you have more inquiries, reach out to us here.

wellhead price

What’s the price of oil today? Well, that strongly depends on both where you are. Also at what stage along the resource supply chain you are on. In the realm of mineral rights, there are many different ways in which natural resources are quantified and sold. This includes such as oil, natural gas, and coal. For those with a passive or direct business interest in oil or gas production, we’ve developed this resource as a guide to wellhead price and some of today’s most commonly sought-after definitions.

What is a wellhead price?

The wellhead price of oil or gas is the exact value of the resource at the point of extraction. The “well-head” refers to the pinpointed location in which a well produces oil ready for sale. The term wellhead price can be used in place of both “field price” and “realized price,”. It is also occasionally expressed as the “price of oil at the well-head.”

Here, the most important thing to understand about the wellhead price is that no costs have been levied against the value. Wellhead pricing is the absolute highest valued resource cost along the supply chain as transportation and handling costs are not accounted for in this figure.

Why is the oil price on my royalty payment different from the wellhead price?

The oil and gas price as expressed on a royalty statement is almost always going to be lower. This is compared to the wellhead price. This is largely due to the fact that oil must be refined after it has been extracted from the earth. Knowing this, transportation costs ensue, which bring down the net price of the oil that has been extracted and sold.

As a mineral rights owner, you are entitled to a fixed percentage of the gross profits. This is from a successful oil and gas lease. Although transportation costs are deducted from the wellhead price, these expenses are absolutely necessary. This is to bring the product to market and therefore netted from the wellhead price.

Price Differentials in Oil and Gas Wellhead Price

Besides transportation, there are a few other factors that make up the price differentials. This is between the wellhead price and the actual price of an oil or gas production. Depending on the quality of the raw materials, there are extensive costs for adjusting the quality and energy content. This also includes adhering to local regulations.

Here, we can expand the definition of a wellhead price. This transpires at “an arms-length agreement” in the sense that all parties are acting in their own best interests. Wellhead prices are meant to represent fair and balanced values of resources. On the other hand, the actual price of any given resource extraction may be heavily influenced by existing business and supply chain relationships that could not be classified at arm’s length.

The First Purchase Price (FPP) of Oil

After the price differentials have been applied to the wellhead price of an oil production, the first purchase price (often abbreviated as FPP) is released by the seller. The first purchase price is measured in price per barrel, typically expressed as price per bbl, and is valued at the exact price at which oil is sold to the first buyer after entering the market.

The first purchase price of oil must be reported by the purchaser after completing a fair and honest arms-length transaction. Sales are typically expressed on a run ticket or another form of purchasing receipt. Deductions and premiums may be added on or adjusted if there are many mineral rights owners or extenuating circumstances.

What is the commodity price of oil?

The commodity price of oil is the value at which the price of oil is traded in markets throughout the world. Much like gold, silver, natural gas, and now water, oil is a commodity that is taken from producers and sold on the open market. Expressed as a real dollar amount, the commodity price of crude oil is sometimes referred to as black gold thanks to its centuries as a valuable resource.

Many people believe that the commodity price of a barrel of oil is the most important commodity in the world, as the resource is used in nearly every country in the world to varying extents. The commodity price of oil rises up and falls down all as a result of global supply and demand. Like in 2020 the commodity price of oil dropped dramatically after global demand was reduced as a result of the coronavirus pandemic.

If you have further questions about gas, oil, royalty payment, and more, feel free to contact us here.

oil and gas mineral royalties

When it comes to owning mineral rights, for many, it’s all about the royalties. No, we are not referring to the King and Queen, nor are we talking about the compensation an actor receives from an appearance on a program or advertisement.

Instead, mineral royalties in the context of mining are the monthly payments that mineral owners receive when natural resources are extracted and sold. In this article, we will explain everything you need to know about oil and gas royalties.

What are mineral royalties?

Mineral royalties are given to mineral rights owners when an active oil or gas lease produces and brings resources to the market. Paid by the producer and seller, mineral royalties are generally paid forty-five to sixty days after the resource is sold to the mineral rights owner.

The United States is one of the few continues in the world in which individuals and businesses can earn mineral royalties for privately sourced oil and gas.

What is an oil royalty check?

An oil royalty check is the actual, physical receipt of a royalty payment. Although many modern operations utilize digital payments through automatic deposits, it is still very much commonplace for gas and oil owners to receive physical royalty checks in the mail. With this, companies are able to package gas and oil royalty checks with detailed breakdowns of how the payment was calculated.

How are oil and gas royalty payments calculated?

Oil and gas royalty payments are calculated by three main factors: the amount of the resource produced, terms of the lease, and current market value. In a mineral lease, ownership is defined as full or partial mineral rights to a parcel of land. From there, a percentage of the total monthly sales is defined to represent the mineral rights owner share and oil and gas royalty payment amount.

Here is an example in simple terms. If an operation produces $10,000 worth of oil in March (based on market price and quantity sold), a mineral rights owner with a 10% stake in profits would receive a $1,000 mineral royalty payment that month. Of course, this approximate calculation is presented before mineral royalties taxes.

Are mineral royalties paid on gross or net?

Oil and gas royalties are almost always paid on net mineral sales, rather than the gross profit of the production. With many shareholders, investors, and interests, large oil and gas operations must dish out many mineral royalty payments before claiming a project’s gross profit.

How is the oil and gas royalty income taxed?

The IRS taxes mineral royalties as ordinary income, based on the exact dollar amount of the oil and gas royalty payment. Annually, active mineral rights owners are required to report their oil and gas royalties on their tax returns as income. Before the mineral royalty payments reach an owner’s pocket, however, it may also be taxed for severance and other local considerations.

How often are oil and gas royalties paid?

Almost always, mineral royalties are paid on a monthly basis. Oil and gas payments are made along the ordinary accounting cycle of the producers, generally in the mail two months after the resources are sold. Natural gas royalties are commonly paid 3 months out, rather than the oil royalty payment standard of 2 months.

Depending on your lease and location, there may be a minimum mineral royalty amount that must be reached before a payment is made. If a production produces less than the threshold, the outstanding oil and gas royalty amount will be rolled over into the next month’s payment.

What is the average oil royalty payment?

The nationwide average oil royalty payment rate is about ⅛ of the sales or 12.5 percent. This percentage can then be applied to oil fields large and small, with a huge range of expected oil royalty payments across the country.

Oil royalty percentages are completely negotiable as all mineral rights transactions. With this, longstanding landowners may be able to increase their earnings with royalty payments of up to ¼ of the resources sales.

How long on average do mineral royalties last?

So long as a mineral rights lease stays active and producing, oil and gas royalties will last as long as the well does. While some oil wells are drained at optimal rates for production, the average high-producing mineral deposit will yield for 20 to 30 years. Of course, not all wells are constantly being drained at the fastest rates possible, so large oil wells are likely to last even longer.

Although the terms are completely negotiable, most mineral royalties have a duration of 3, 5, and 10 years. Leases can be renewed with updated agreements and terms if both parties are still interested after the initial term has been completed.

legal-location

If you are buying property, then your deed will likely list your new asset’s legal location. Although the term “legal location” is not always used in property leases and sales, it is entirely necessary if you are entering into a mineral rights agreement.

In this article, we will define the term “legal location” in the context of mineral rights before detailing the components that make up a mineral property’s legal description.

What is a legal location?

In the land law of the United States, the legal location of a property is defined as the exact boundaries of the purchased asset. Although this definition is sufficient for surface properties, it is not enough to define the legal location of a subterranean asset.

What is the legal location of a mining claim?

In mining law, legal location is much more than a property’s land area. Not only do mineral rights extend into the subsurface of the earth, but the natural resource reserves generally extend beyond the boundaries of the property above. With all of this in mind, the legal location of a mining claim must take into consideration all of the geographical, historical, and legal elements of a property.

Legal Description of the Property

The legal description of a property is exactly how the legal location of a mineral claim is defined on a property deed. The legal location of a mineral rights property may be conveyed with a variety of details, depending on which state in which the property is located. In heavy mineral-producing states like Texas, Oklahoma, and North Dakota, legal descriptions are generally required to contain full descriptions of a few key points.

Below, we detail some of the most common elements of the legal description of a mineral rights claim. Failure to fully understand the legal location of an asset may be critical in determining whether or not a purchased mineral property is as advertised.

Latitude and Longitude

First and foremost, the best way to define the location of a property anywhere in the world is the latitude and longitude. Not only is this helpful in crowded city streets, but it is also equally as important when considering oil reserves loathed in remote, desolate areas of the United States.

Property Boundaries

Once you know your property’s longitude and latitude, it will then be very easy to identify it with the proper parcel of land for which is registered at the location. This may be most easily located by looking up the land’s parcel tax ID or parcel number. This is the most important registration number to legally bind you to your new property.

If you cannot find the parcel number on your property deed, check your property tax bill if you have owned your land long enough to have received one of them. If it is a new property in question, be sure to verify with your local land office.

County & Abstract Number

A property’s ID number is first defined by its abstract number, which is unique in each of a state’s counties. The abstract number is assigned by the state’s land office and helps quickly identify property locations.

Survey Name

The survey name of a mineral rights property’s legal location refers to either the location’s block section or county. Surveys are generally named for the organizations that conduct the first full measurement of the land. Independent surveys may also be referenced in the property’s survey name.

Block Section, Name, and Number

The block section of a legal location is a smaller division within land surveys to help define each boundary. Blocks are sectioned into distinct names and numbers, some of which are highly-specific decimal designations. In some states, the block number and the survey number are the same figures.

Alternate Name

As mineral rights can change hands between individual owners and large corporate entities the names are occasionally changed through history. If a parcel of land has had its legal name changed, then past names may be listed on property deeds as “alternates.” These may be required in some states to protest new property owners from misleading parcel identification.

How to Find A Property’s Legal Location

The legal location of a mineral rights property should be included in all negotiations, contracts, and deeds. Within each state, local land offices can be contacted for any questions about a mineral rights survey, block, or ID number. In most cases, it is very easy to find your property’s location if you know its county, township, and approximate location.

oil and gas permits

The United States of America is one of the few countries around the world that permit private citizens to own mineral rights. Within the borders of our country, rules, regulations, and policies differ heavily from state to state on a number of issues. For oil and gas, this is no different as state permits will vary throughout different territories.

In this quick information blog, we will define what state permits for oil and gas are and answer some of the most common questions regarding who, what, and where oil and gas permits must be filed. After diving into the basics for these terms, we will provide a few additional resources in which information about local state permits and drilling permits can be found.

What are oil and gas permits?

In the world of mineral rights, such as oil and gas, a permit is an application that must be filed with the local government to drill, complete, re-enter, or recomplete a well. Permits are required in all states in which oil and gas drilling is permitted, and are usually filed with the Land Office of a state government.

Who is required to submit a state permit for oil and gas?

State permits are issued to oil and gas operators for active or soon-to-be active mineral rights. Mineral rights owners do not need to worry about filing a state permit, as that paperwork will be done by the oil or gas operator.

Only issued to American citizens, state permits must be filed by oil and gas operator employees that are legally allowed to work on the project. More often than not, companies will have a dedicated landman to file permits that are not directly involved with any of the other parts of the overall oil and gas operation.

When are oil and gas permits filed?

Within any organization, state permits are typically filed as soon as possible after an action is taken on an oil and gas lease. If the well is ready to be drilled or completed for the first, second, or final time, a permit must be filled at every step along the way.

In typical instances, permits will last for one full calendar year before expiring. This may vary by the state or the nature of the permit as well.

Why is permitting required for oil and gas?

State permitting is required to ensure the ongoing health of the earth and the success of an oil and gas operation. Unpermitted drillings may cause damage to the earth or reserves which could lead to catastrophic environmental and economic damage.

Oil and gas permits are required in order to ensure the health and safety of:

  • All mining operations
  • The quality of air, water, and earth
  • Well drilling
  • Use of roads
  • Resource storage
  • And more

Is it possible to file oil and gas permits on federal land?

Yes, in some parts of the country federally reserved land does not technically belong to any state in particular, even if found entirely within one’s borders. In states like Nevada, Arizona, and more it may be possible to file an oil and gas permit for the exploration or extraction of natural resources from federal lands. Information for outstanding federal mineral rights can be seen here.

Resources for filing State Permits for Oil and Gas

Although not every state has a dedicated mineral rights office, most states in the Union have at least one main point of contact or center of information to file permits for oil and gas operations. If you are looking for a reference for your local state, we will include some of the most popular state resources below.

Texas: Please see the GLO energy business resource page for mining on state lands within the Lone Star State. Commissioned by George W. Bush, GLO provides resources and permits for prospecting, leasing, and mining operations.

Oklahoma: The Department of Environmental Quality is Oklahoma’s home for general oil and gas permits as well as specific applications for special operations and businesses.

North Dakota: North Dakota-based operators can make use of the Frequently Asked Questions page for the state’s oil and gas permitting processes.

Colorado: In the centennial state, oil and gas permits are issued by the Colorado Oil and Gas Conservation Commission.

Pennsylvania: Resources for the Keystone state’s oil and gas permitting process can be found on the PA Department of Environmental Protection website.

Nevada: Please see the State of Nevada Commission of Mineral Resources Division of Minerals page for current information on state permits.

Arizona: Since 1915, Arizona’s State Land Department has been the best resource for locating and filing state mineral exploration and drilling permits.

mineral-rights-recorder

Like many different kinds of highly valuable property, mineral rights must be recorded with a government official. Similar to real estate or automotive purchases, mineral rights can transfer between owners, but only once the official paperwork has been documented and signed.

As there are many questions regarding any legal stipulations about land ownership, we’ve put together this guide to help clear some things up below the Earth’s surface. In this glossary and FAQ, we will define some of the most commonly used terms in official mineral rights records before providing additional resources to help localize your questions and answers.

What are mineral rights?

If you are just getting up to speed with your purchased or inherited land, first you must understand what it means to own mineral rights. Available as part of a fee simple estate, or purchased separately in a split estate, mineral rights entitle the owner to any valuable resources that can be found beneath the earth.
Most commonly, mineral rights are associated with oil and gas used for energy, manufacturing, and more. Mineral rights are not available in all areas, available only to Americans, Canadians, and residents of a handful of other countries.

How are mineral rights recorded?

Officially, mineral rights are recorded with a mineral rights deed. If you own your land in a fee simple estate, then there may not be a separate deed for your subsurface rights, but rather it will be designated as part of your whole property. Knowing this, it is important to completely understand what property rights are being conveyed in the event of a sale or purchase.

Physically, mineral rights records exist in a government office or digital database. Copies of deeds are often kept by local governments so as to retain a record and solve any disputes about the property. A copy should also be kept by the mineral rights holder so that he or she can legitimize ownership before entering into an oil and gas lease.

What is a recorder of deeds?

A recorder of deeds in a government official, office, or entity that is responsible for the processing and maintenance of public record deeds. While almost all deeds are recorded physically, in-person, the practice of digital databases for mineral rights deeds has only become more prevalent since the turn of the 21st century.

How to Find your Recorder of Deeds

It is very easy to find your local recorder of deeds before entering into a property transaction. If you live in a city, check with the city office. If you live outside of town, which is much more common for mineral rights negotiations, then it is likely that your recorder of deeds will be at the county level.
Deed recording practices vary heavily from state to state. If you are in an area that is currently being used for oil, gas, or other resource production, then your local office may have a designated recorder of deeds solely for mineral rights transactions.

What does the recording of a deed do?

Whenever a deed becomes recorded, the property owner can officially claim the rights to whatever is described in the document. Recording typically occurs during the transfer of ownership from one individual or entity to another. Once a deed is recorded, mineral rights owners are then free to enter oil and gas leases to receive mineral royalty payments for the valuable resources extracted and sold from the property.

Are recorded deeds public information?

Yes, more often than not, recorded deeds are considered to be public information. While not just anyone can access them, deed recordings are necessary to be considered public information in the event of a legal dispute or future transfer of ownership.

Are unrecorded deeds valid?

Surprisingly, unrecorded deeds are still considered valid in many states across the country. So long as the buyer and the seller have agreed to terms, an unrecorded deed may still be valid if the new owner wants to pursue new ventures with the land itself. With public records, however, some difficult scenarios can arise if someone were to impersonate a deed owner.

When should I record my mineral rights deed?

We recommend recording your mineral rights deed as soon as possible after you purchase your new property. In doing so, the world will become aware of the new owner, and oil and gas companies may begin to contact you with lease offers. However, mineral rights deeds in some states may not be legally required to be recorded under any specific time period. Therefore, you can take several months or years before officially recording your deed.

oil-gas

Oil and gas revenue checks are everyone’s favorite part about mineral rights ownership. With money in the mail, oil and gas revenue checks are a great way to earn passive income from an investment in mineral rights.

In this complete guide, we will cover some of the most frequently asked questions about oil and gas revenue checks to help current and future mineral rights owners understand what to expect. After defining a few terms, we will go into detail about some of the average statistics that surround oil and gas revenue checks.

What are oil and gas revenue checks?

First and foremost let’s define what we are talking about here. Oil and gas revenue checks are monthly states that are given to the owner or partial owner of active mineral rights. Oil and Gas revenue checks may also be called “oil and gas royalties” or “oil and gas royalty statements.”

Today, most oil and gas revenue checks are still sent physically in the mail. Typically, they show a full picture of the month’s operation, resource price, ownership percentage, and actual check dollar amount.

Who sends out oil and gas revenue checks?

Oil and gas revenue checks are typically sent out by the operator or producer. In the largest oil and gas operations, companies will utilize either an in-house or third-party revenue distributor. More often than not, oil and gas revenue checks may be the only interaction between the actual extraction company and the person or entity that receives the check.

How do you get an oil and gas revenue check?

To receive an oil and gas revenue check, one must have a stake in an active and producing oil and gas operation. Most commonly, this occurs when a mineral rights owner enters into an oil and gas lease agreement for a company to locate, extract, and sell valuable resources from the owned property. Oil and gas royalty checks are typically mailed via the US Postal Service in discreet packaging.

How often are oil and gas revenue checks sent?

Across the United States, the industry standard for oil and gas revenue checks is a monthly recurring payment. If you are not a mineral rights owner, and rather have an overriding royalty interest in an oil and gas operation, then it may be possible that you only receive a one-time revenue check after you participate in the process.

How much do you get paid in an oil and gas revenue check?

Technically, there is no limit on the amount of money that you can be paid in an oil and gas royalty check. The exact figure that you will receive is based on a predetermined amount as defined in your mineral rights lease agreement contract. In most scenarios, this is expressed as a fixed percentage of the total sales revenue of an operation each month.

Most commonly, oil and gas revenue checks are paid to about 12.5% or one-eighth of the total monthly profit. More often than not, this is then divided among multiple mineral rights owners on a large, active property. In some states, there are legal minimum oil and gas royalty compensation percentages.

What is the minimum amount of an oil and gas revenue check?

In most oil and gas leases, there will be a predefined amount of money that must accumulate before a revenue statement is sent to a mineral rights owner. If an operation has been slowed due to seasonality, weather, or other condition, months in which production and sales do not meet the minimum threshold will generally cause producers to temporarily withhold payments.

What taxes are paid on oil and gas revenue checks?

There are a considerable number of taxes that may be applied to any given oil and gas revenue check, with total value varying depending on your location. Most commonly, it is not unusual to see severance taxes, conservation taxes, state taxes, and more on a monthly oil and gas revenue check. Although it may not be significant, revenue checks may be taxed at rates up to 10% across the country.

Why are there deducted items from an oil and gas revenue check?

Unlike some products, oil, gas, and other natural resources must undergo a significant amount of modification and processing before becoming ready to market and sell. For this reason, oil and gas operations incur significant expenses between the extraction and sale stages. These process costs are divided among stakeholders and credited to revenue checks based on actual expenses. Most commonly, deductions may represent costs associated with dehydration, compression, gathering, processing, and treating the minerals.

A “shut-in royalty” may sound like it is describing a member of high society that spends a little too much time at home. After all,” shut-in” is a term that is commonly used to describe people who are either voluntarily or unwillingly confined to a home, room, or even bed.

In the context of oil and gas, the term “shut-in” is used to describe wells, operations, and royalties relating to mineral rights production. Below, we will define the meaning of these terms and answer some of the most frequently asked questions surrounding shut-in wells for oil and gas production.

What does a shut-in well mean?

A “shut-in well” is a petroleum industry term meaning any gas and oil well that has been closed off for further production or has incidentally lowered its potential output. Shut-in oil wells come in two forms: those that have been shut down in an emergency and those that are designed to influence the supply of oil or another natural resource.

What causes shut-in wells within the oil and gas industry?

Most commonly, shutting in of oil and gas well is the result of unsafe or unusual conditions in the environment and economy. Namely, natural disasters are the leading cause for temporarily shutting in oil and gas operations.

Natural Disasters

In areas of the country where oil fields are found under large flat reserves of desolate land, there are a few different types of natural disasters that may cause oil wells to be shut-in.

Near the shores in Texas and Louisiana, shutting in and worker evacuation are often the hurricanes and other tropical storms. In Oklahoma and North Dakota, it is much more common for oil and gas operations to have emergency tornado protocols.

Lower Oil Demand

During the global coronavirus pandemic of 2020, stay-at-home orders caused the demand for petroleum to dramatically decrease overnight. With passenger cars, work vehicles, and truck fleets off of the road, the supply of oil began to stockpile in barrels and distribution centers across the country.

In response to this, many oil wells in high-producing states like Oklahoma and New Mexico began to shut-in wells to combat the oversupply of oil. Things like this tend to happen on a smaller scale throughout the normal operation of an oil well to combat fluctuations in local markets.

Project Delays

Everyone that has ever been involved with an oil production site knows just how many project delays one can expect in every unique situation. From machinery and labor failures to governmental and weather-related delays, projects rarely fall on the expected timeline set forth by investors.

Shut-ins from unexpected project delays can halt oil and gas production for hours, days, or weeks depending on the severity of the challenge.

Shut In Royalty

Although an oil or gas well shut-in may not affect most people in the United States, those that own mineral rights may be a bit keener to pay attention to mineral production in certain plants. If you own complete or partial mineral rights of an active plot of land, then your monthly oil and gas royalties may be instantaneously affected by any operations shutting in.

What is a Shut-in Royalty?

A “shut-in royalty” is a placeholder royalty payment to a mineral rights owner while the operations are temporarily shut-in. Essentially, what this means is that shut-in royalties assure oil and gas owners that they will still be paid during operation shutdowns caused by natural disasters, company delays, or government ordinances.

Shut-in Royalty Clauses

In an oil and gas mineral rights lease agreement, most quality contracts will include a shut-in royalty clause to guarantee some form of shut-in royalty. Most commonly, this is expressed as a real dollar value but may also come in an amount more closely related to recent extraction and sale operations.

Shut-in Royalty Provisions

Aside from the compensation amount, shut-in royalty provisions on an oil and gas lease should include a timeframe in which mineral rights owners can expect to be compensated. Depending on the conditions, shut-in royalty payments typically fall within a 90-day timeline.

How can I guarantee shut-in royalties?

Every oil and gas lease negotiation is different, and there is no standard contract throughout the fifty states of America. Before you agree to permit oil and gas drilling on your land, it is best to ensure that there is a shut-in royalty clause or provision directly stated on your oil and gas lease. Within the shut-in clause, payment and timeline considerations should be addressed.

To get the most guaranteed earnings out of your mineral rights lease, it is strongly recommended to work directly with a professional, specialized oil and gas intermediary.