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 commonly asked questions of property owners before an oil well is drilled is this: “How will an oil well affect my property value?” In this article, we are going to outline the possible effects that an oil well will have on the value of 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. Although this income is separate from your property value, 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, but 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.
Without the individual and families of a close-knit community around, property values of remote lands may have an adverse effect when considering an oil well. Oil wells and mineral extraction attracts industrial development, which 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 overall value of the property.