Informational Guides & How-To Resources with specific types of property or business. Check our valuable guides on this page today at Ranger Land & Minerals.

A Quick Guide to The Oil and Gas Laws of the United States

Oil and Gas Laws of the United States: A Quick Guide

, ,

Oil and gas ownership has one of the most interesting legal histories in the United States. The United States is one of the only countries that allows for private ownership of minerals found on the earth. Within the state, the laws surrounding mineral rights and oil and gas laws vary greatly between each state. In this article, we are going to outline the essential oil and gas laws to be aware of in the United States.

Who can own oil and gas in the United States?

The term when rights to own oil and gas below the surface of a property is “mineral rights.” In the United States, mineral rights is claimable by private individuals. Moreover by corporations, Indian tribes, or by local, state, or federal governments. The ownership and transfer of oil and gas rights are mainly operated under regional statutes and common law. These both fall beneath constitutional and federal law as well.

Oil and Gas Rights as Property

Over the past 150 years, oil and gas ownership in the United States has diverged into a huge portfolio. For private oil and gas rights today, the mineral rights of a piece of land can be sold, bought, or leased. It is as if they are any other piece of property. Mineral rights or “subsurface rights” is purchasable, sellable, or leasable independently. Moreover together with a property’s surface rights.

Finding Oil and Gas on Public (Federal or State) Property

The General Mining Law in the United States allows individuals and companies to “locate” mining claims on public lands. At the federal level, there is BLM (Bureau of Land Management) land. This is where individuals can explore the area for potentially valuable minerals. An individual does not become the subsurface rights owner of public land. With approval by the federal government, the individual can have access to develop and extract the minerals.

The same system is in place for state-owned land. The specific oil and gas laws surrounding ownership and transfer vary from state to state. For a full list of Mineral Rights Laws by state, see this index page from MineralWeb.

How long do mineral rights last?

How long do mineral rights last?

,

There are many situations in which someone may ask, “How long do mineral rights validity last?”. Sometimes, an individual may inherit mineral rights from someone deceased, only to be left with unexpected taxes and a whole lot of questions.

In other cases, abandoned residential and commercial plots can be orphaned, leaving former owners to wonder if they are entitled to the property. In this article, we will explain how long mineral rights last and what that means for future owners.

Mineral Rights Last as Long as You Do

If you own mineral rights, they are yours. You own them until the day you die, that is unless you give them to someone else. There are three ways mineral rights are transferred: as a sale, as a gift, or in a will in the event of a death. Mineral rights are just like any other piece of property. As the rightful owner, you have the right to it so long as they are yours.

Does a person or a business were to own mineral rights and then fail to pass them to another party? then the property is considered abandoned. This is going to happen if a person dies or simply forgets they own the property or if a business were to cease operation but fails to sell its land.

Abandoned or Unclaimed Mineral Rights

In America, mineral rights laws vary from state to state. For the vast majority of states, however, abandoned or unclaimed mineral rights are going to eventually default to the current surface rights owner. This can take over 10 years, although is only usually a handful, depending on your location.

Conclusion

In conclusion, it is always important to do and keep your paperwork in order. If you own mineral rights, you own them until they are transferred from you in business or in death. Do you intend to bequeath your mineral rights to an heir? Then, it is important to make sure that everything is in order.

If you have further questions about mineral rights validity, feel free reach out to us here.

Can I sell land and keep my mineral rights?

Mineral Rights to Land | Can I sell land and retain mineral rights?

,

So you’ve got to move, it’s a shame. No matter what lies next, it is almost always difficult. Difficult to let go of the land and home in which you have spent so much of your life in. What makes it even tougher, however, is if that land is also earning you a monthly income. That’s a situation where you, as a seller, want to retain mineral rights to land.

For some, leasing mineral rights is a highly profitable venture in which little effort is needed. If you own your land and have leased your mineral rights to an oil and gas company that is drilling and selling precious minerals, then you are earning oil and gas royalties. Surely, you’d like to keep those checks coming in the mail, right?

Retaining Mineral Rights in a Sale of Land

Well, the answer is yes. You can sell your land and keep your mineral rights. In order to do so, you must add an exception in the contract for the sale of your land. You will be entering into a split estate contact with the new party, who will now be the owner of the surface rights.

Benefits of Keeping Your Mineral Rights

Are you receiving royalties from your mineral rights? Then, retaining their ownership will keep your income stream steady. If your land has not yet been explored for oil, gas, or precious minerals, then your non-producing mineral rights still may be valuable. If a company were interested in drilling on your property, as the mineral rights owner, you would be in charge of the negotiation.

Downsides When Seller Wants to Retain Mineral Rights to Land

Unfortunately, everything isn’t always going to work out one hundred percent in your favor. If you are the seller who wants to retain mineral rights (especially if there is active drilling), the pool of interested people is going to shrink. Some potential buyers may not like the idea of only owning the surface rights. Especially while the mineral rights are under maintenance by someone else. This may result in a lowered negotiated price for the sale of the land.

split estate

What is a Split Estate for Oil and Gas Drilling?

,

A split estate is defined as an “an estate where the property rights to the surface and the underground are split between two parties.” Split estates are unique, as the United States is one of the few countries in which individuals can legally own the property below the surface of the earth. In this article, we will go into detail for a full understanding of split estates as they relate to oil and gas drilling.

How is a Split Estate Created?

Whenever land is purchased, if the new owner owns the surface and subsurface rights, then it is known as a “fee simple estate.” If that owner were to go off and sell the subsurface rights to another individual or entity, then it becomes a “split estate.” The estate is essentially split into what are known as “surface rights” and “subsurface rights” which can also be referred to as the “mineral estate.”

The Different Types of Split Estates in the United States

One of the most famous early examples of a split estate in the United States was created with the Stock Raising Homestead Act of 1916, in which the government retained mineral rights below 70 million acres of newly privatized surface land. Since then, there has been an endless number of possible split estate ownership combinations. For the most part, split estates are split between private parties, state governments, or federal governments with each entity controlling one or both parts of the property.

Mining on a Split Estate

If a mineral rights owner wants to explore and produce valuable resources from a split estate, then they must notify the surface rights owner. The subsurface owner issues a “Notice of Intent to Locate (NOITL)” to the surface rights owner which will allow the claimant to explore the property and stake mining claims for 60 days after a 30 waiting period.

oil and gas depletion allowance

What is an Oil and Gas Depletion Allowance for Mineral Rights Owners?

If you own mineral rights or oil and gas royalties, then you may be lucky enough to have a large income stream each month for the extraction and sale of precious minerals. When it comes time to pay taxes on your earnings, there are a number of deductions designed to help you keep as much of your earnings as possible. In this article, we are going to focus on fully explaining oil and gas Depletion Allowances as it relates to mineral rights and royalties.

Depletion Allowance Definition

Depletion can be defined as “using up a natural resource through drilling, mining, etc.” The IRS allows for a mineral rights owner to account for the reduction in mineral production through an oil and gas depletion allowance. This allows mineral rights and oil and gas royalty owners to recover the cost from initially high capital investment.

The Two Types of Depletion Allowance for Oil and Gas Royalties

There are two main types of oil and gas depletion allowance: cost and percentage. Mineral rights owners will generally choose whichever method will lead to the highest possible tax deduction.

Cost Depletion Allowance

In a cost depletion allowance, an estimate is made as to what percentage of the valuable reserves can still be recovered from an active property’s subsurface. The taxpayer will take this percentage and apply that to the original cost of their capital investment.

Percentage Depletion Allowance

A percentage depletion allowance is slightly different. Instead of applying a percentage of the estimated remaining minerals to the original investment cost, percentage depletion allowances use a flat rate of 15% of the reserves gross income. If the gross income is high, this allows for percentage depletion users to recover costs that exceed the cost of the original investment.

In percentage depletion, there is a limit on the amount of taxable income as it applies to oil and gas royalty owners. Currently, It is either 65% of your property income, or 100% of your overall income, whichever is smaller without deductions or allowances for depletion.

How Much Money Can You Make From an Oil Well?

How Much Money Can You Make From an Oil Well?

, ,

What is one of the most commonly asked questions from current and future mineral rights owners? Simply, how much money can I make from an oil well? Of course, there are an enormous amount of variables and individual circumstances, but an oil well on your property (or someone else’s property) can lead to a very high-income revenue stream. In this article, we are going to layout a few scenarios. Scenarios to help explain the potential money you can make from an oil well in the United States.

Variables that Determine Your Oil Well Earnings

No two oil wells are alike. So how to be considered for the next state or private drilling contract? Well, your land must be up to pretty high standards in terms of how profitable an extraction operation may be. When looking for new land, oil companies look out for:

  • Property Size
  • Property History
  • Estimated Number Size of Oil Reserves

If your property looks good, then a contract will be drawn up to compensate you for a portion of the minerals extracted and sold from your oil well. The amount of money you can make from an oil well each month will be based on your:

  • Percentage of Mineral Rights Ownership
  • Royalty Percentage as Defined in the Lease Agreement
  • The Price of Oil
  • The Volume of Oil Produced and Sold

What is an Oil and Gas Lease Assignment?

A typical assignment of oil and gas leases will grant all of the assignor’s interest in a lease, a specified percentage of the assignor’s interest in a lease, or a specified amount of the oil and gas lease.

Oil Royalty Earnings Calculator

If you are looking for a quick estimate to determine how much money you can make from oil well, then you can use this helpful oil and gas royalties calculator . By using the variables defined above, this tool can help you get a baseline estimate for home much you can make from your producing mineral rights. Depending on your share of the production, oil royalty payments can range from as little as a few dollars to hundreds of thousands of dollars per month

income tax on oil and gas royalties

Taxes on Oil and Gas Royalties: What is Paid?

,

What Income Taxes on Oil and Gas Royalties are Paid

A wise man once said that there are two absolute certainties in life: death and taxes. Yes, unfortunately, if your mineral rights are earning you a nice oil and gas royalty paycheck every month, those earnings are subject to taxation. In this article, we will outline the taxes on oil and gas royalties that are or are going to be deducted from your paycheck.

Federal Income Tax on Oil and Gas Royalties

Any money that is headed into your bank account is going to be considered income. Oil and gas royalties are no exception. Therefore the standard federal income tax on oil and gas royalties will be deducted when you go to file your taxes. Depending on your income bracket, this could be anywhere between 10 and 37 percent of your income.

State Income Tax on Oil and Gas Royalties

In the United States, tax laws between individual states have a large range of policies. Certain states, like Texas, Wyoming, and Nevada do not have a state income tax deduction. Most states, however, will claim a small percentage of your income with a state income tax. The amount allocated is either a flat rate, like in Colorado and Pennsylvania amongst others, or a percentage of your income based on your total earned each year.

Oil and Gas Royalty Bonus Income Tax Rates

Although the monthly income from your oil and gas royalties are considered as normal income, bonuses received during the sale and signing process are classified as a separate kind of earnings. Although they are taxed at roughly the same rate, if you receive a bonus signing rate of anything above $600, you will have to file that income separately from your monthly oil and gas royalty income.

Tax Deductions for Mineral Rights Income

When it comes time to do your taxes on oil and gas royalties, you’ll want to make sure you add up all of your deductions as they relate to your oil and gas royalty income. Depending on your involvement with the extraction process, you may be eligible for deductions on marketing, state income, severance, depletion allowance, legal, professional, or shipping expenses. Consulting a tax professional will be the best way to explore and deduct the highest available amount from your annual taxes on oil and gas royalties.

Property Value

How Does an Oil Well Affect my Property Value?

,

If you own a piece of land that an oil and gas company is interested in exploring for valuable minerals, then there are a lot of things to consider before you strike a deal. One of the most common questions of property owners before an oil well drill is this. “How will an oil well affect my property value?”. In this article, we are going to outline the possible effects that oil well for you. You learn how to have great value for your land.

Earning a Passive Income Stream with Oil and Gas Royalties

If you sign an oil and gas lease for your property’s mineral rights, then you can potentially earn a monthly income from the sale of resources extracted from your property. This income is separate from your property value. However, it is a nice passive income stream that may make you forget about your property value altogether.

Whenever you go to sell your land, having an active oil well operating on the property can actually be quite the selling point for some interested buyers. If the sale of your surface rights includes the transfer of an oil or gas royalty payment, your property can be sold at a premium, as it includes a monthly check in the mail, so long as the oil well is active.

Oil Well Property Value Effects: Residential vs. Remote

Oil wells are similar to solar panels in that they are necessary to generate the energy we need. However, some people simply do not like to look at them. One study found that some residents in Colorado won’t consider buying a home anywhere near an oil well as they “don’t want to even look at anything remotely close to any existing or proposed well sites.” For this reason, residential property values in dense communities may be negatively affected by the presence of an oil well.

Property values of remote lands may have an adverse effect when considering an oil well. This happens usually without the individuals and families of a close-knit community around. Oil wells and mineral extraction attracts industrial development. As a result, it can lead to long-term income opportunities. With this in mind, an active oil well in a remote desert or farmland can potentially increase the property value. If you have further questions related to oil property value, feel free to reach out to us here.

mineral rights lawyer What to know Before you Sell Your Mineral Rights

What to Know Before Selling Mineral Rights

So, you’ve decided to sell your mineral rights, great! You are about to enjoy either a huge influx of cash, some long-term royalty payments, or excellent tax benefits in purchasing another asset through a 1031 exchange. You are ready to talk with a mineral rights lawyer ASAP.

Ready to sign the papers to hand over your mineral rights? Before doing that, there are a few crucial things that you will want to make sure you have already considered. In this article, we will outline the most important things to know when selling mineral rights.

A Full Understanding of the Assets Outlined in the Negotiation

To put it simply, you’ll first want to “know what you’ve got.” If you’re selling mineral rights, that means that you’re selling your subsurface rights which include any valuable minerals that may be below your property.

Here are some facts In states like Texas, Oklahoma, and Colorado? Do you know that there is a large chance that a company will be primarily interested in oil and gas reserves? In other cases, your property could even have iron, copper, gold, or other precious metals below the surface.

Here, you will also want to know the exact size and percentage share of your property’s mineral rights. Make sure that you know the exact acreage of your property. Do you only own a portion of your mineral rights? Then it is a good idea to double-check your paperwork. This is so that you are compensated for the exact percentage you are entitled to.

An Approximate Value of Your Mineral Rights Worth

Once you’ve figured out exactly what you own, then it’s time to understand what it might be worth. Mineral rights can be very highly valuable assets but can be difficult to price. This is because purchasing companies don’t have the legal obligation to share transaction information with the public.

The value of mineral rights is determined by a combination of a few things. Most notably, brokers consider the size of the property, the number of wells (both in use and vacant), current market prices for minerals, and potential future earnings as the primary influences in a property’s mineral rights value. It is extremely advisable to speak to an expert when estimating the value of your mineral rights.

Common Red Flags for Mineral Rights Buyers

Before you sign on the dotted line, make sure to thoroughly review your interactions and contract with the potential buyer of your mineral rights. Because of their value, many individuals and companies set out to earn as much as possible.

Above all, make sure to read the fine print and consult a mineral rights lawyer if there is anything you do not fully understand in the agreement. Everything is negotiable, so it is not advisable to take the first offer you receive. Be wary of any company that appears to be in a hurry. Also, those who want you to accept a deposit right away. Performing a full background check on the individual or entity will also be able to provide some peace of mind.

If you need support from a mineral rights lawyer, we can guide you through it. Feel free to reach out to us here.

top oil producing states in the US

Top Oil Producing States in the US

Oil was first struck in the United States of America back in 1859 near Titusville, Pennsylvania. It is about 100 miles north of Pittsburgh. What happened over the next one hundred and fifty years? How about the exploration and mining of precious minerals, such as oil and gas? Basically, it has spread all the way across the contiguous United States and onto other territories. Although annual production and ranking vary from year to year, in this article, we are going to discuss the mineral rights and oil extraction of five of the top oil-producing states in the US according to the United States Geological Survey (USGS).

1. Texas

When people think oil, people usually think of Texas, so it should come as no surprise that the Lone Star State of Texas is the top oil-producing state in the US. Texas is able to produce and sell up to 3 times as much oil as any other state year after year. This is due to its massive size and ample preserves. According to statistia.com, 1.28 billion barrels of crude oil were produced in Texas in 2018.

2. North Dakota

In second place comes a state with the domination of the sweeping white tundra of Great Plains: North Dakota. During peak season, North Dakota has reached volumes of producing over 700,000 barrels of crude oil per day. Although the state only began to produce oil in the 1950s, it has quickly risen to become one of the top oil-producing states in the US in recent years.

3. New Mexico

Third on this list is the Land of Enchantment: New Mexico. In the southwest region of the United States, New Mexico is widely known for its bountiful gas royalties thanks to its high number of natural gas and carbon dioxide reserves. New Mexico also produces a large share of crude oil and has been since the 1920s. In recent years, America’s 47th state had a huge boom in oil production, up nearly 7 million barrels per month over previous periods.

4. Oklahoma

The Sooner State is next, as Oklahoma produces enough annual oil to be considerable one of the top oil-producing states in the country. Neighboring Texas to its South, Oklahoma first gained interest in prospective oil miners in the late 1800s. Although the oil production amounts in Oklahoma tend to rise and fall more often than other states on this list, Oklahoma’s long-term consistency of bringing oil to market makes it a great state to buy or sell mineral rights and royalties within. You can also learn more through searching for “mineral rights forum Oklahoma”. Try also “oil and gas forum Oklahoma” to gain more insights now.

5. Alaska

The last state on this list is not in the contiguous United States. Alaska, also known as “America’s Last Frontier,” sits North and West above the rest of America. It has lands and operations rich with oil. You may have heard of the Trans-Alaska Pipeline System (TAPS) which transports oil throughout the largest provincial landmass in the United States. Although the market has been declining slowly since the 1980s, much of Alaska’s land remains unexplored for cost-effective oil production.