WARNING: Selling Mineral Rights vs Leasing Mineral Rights

I have seen many posts on here lately that concern me slightly so I just wanted to post a comment.  Please make sure you understand the difference between selling your mineral rights and leasing them. 

Selling your mineral rights permanently separating your mineral rights from your surface rights.  You will receive the one time payment for that sale and that is it.  This sale is forever, unless by some chance the mineral rights are abandoned in the future and the owner at that time files the correct paperwork and is able to rejoin them.  If you have property that you want to pass on to your children and grandchildren this is something you may not want to do. This can affect property value too if your heirs one day want to sell the land. You are selling all your mineral rights oil, gas, coal, or some future discovery.

Leasing your mineral rights does potentially have some endpoint and you can specify specific minerals, oil and gas but not coal, coal but not oil and gas, and even different layers can be leased to different companies by lease language.  Also the lease language can specify an endpoint five years plus option for second five years if no production then lease ends.  Also if production does occur but later ceases then lease ends.  You are paid for production.  Your land both surface rights and mineral rights remain joined and pass on to your heirs even though minerals may still be encumbered by the lease the payment would go on to heirs as well.  And the rights go back to heirs when lease ends.

PLEASE, PLEASE do not sign any paperwork from anybody without taking the time and the roughly $200 for one hour of an attorney's time to look over said paperwork before you sign it.  There are several posts on here talking about payment for mineral rights and it is not at all clear if the company is leasing or buying.  They use the term bonus which is not accurate when selling minerals.  That is not a bonus.  It is payment for permanent ownership of your mineral rights.  It is a one time payment and you do not get royalties. The new owner gets them.   You will receive letters from various companies even if you have a lease asking to purchase your mineral rights.  If you are already leased you can not lease again so any conversation you are having is one about buying your mineral rights.  Just be cautious and make sure you understand fully what you are signing.

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Permalink Reply by Ronald L. Rohr Jr. on June 10, 2014 at 1:56pm

from what i have read and heard they send a letter and it states that they will offer an amount of 3,000 to 12,000 then they say depends on what you have in the ground and your neck of the wood's if people were smart they would just hold on to their minerals. and their land. bottom line is most people have lived above their means for so long that credit is all they have and that is what the oil and gas people and the groups of investors are hoping and counting on so they can buy everything dirt cheap.

Permalink Reply by jason irvine on June 10, 2014 at 2:54pm
I have advise. Don't sell don't sell don't sell. I forgot to add. Don't sell. They will never offer enough to be worth it value
Permalink Reply by jerry lee nichols on June 10, 2014 at 4:04pm

One other point is that banks will not loan money on property without the mineral rights,at least that is true of Belmont Savings Bank. I recently purchased a rental property and that was a stipulation.

Permalink Reply by Robert Thorne on June 10, 2014 at 4:09pm

Is there an endpoint to storage fees set in the 1950's if you sold the surface land at that time and retained ogm rights.

Permalink Reply by Kyle Nuttall on June 10, 2014 at 4:11pm

If it's being used for storage and they're sending you storage fees, it'll keep going until that's no longer the case.

Permalink Reply by Kyle Nuttall on June 10, 2014 at 4:12pm

Attorney here.  My advice to anyone who calls is to keep your minerals.  It'll be far more valuable when leased.  Hold on, and it will be valuable.

Permalink Reply by Gringo on June 10, 2014 at 5:30pm

It is foolish to blanket statement " don't sell ". Everyones situation is different, there are many things to consider and not to take lightly, And OGM's are a lot of times sold after leased. Some things to consider. Taxes-Royalties taxed at normal rate / OGM sale taxed at long term capital gain rate, much lower. Time Value of money, all property is not the same geology ( fault lines ). Adjoining properties not willing to lease screwing up unit. Political winds changing, and more. Again no 2 situations are the same. I will say the majority of the time keeping your OGM's is the best thing.

Permalink Reply by Kyle Nuttall on June 10, 2014 at 5:42pm

I'll ditto that, Gringo.

Permalink Reply by Diane Sutherland on June 10, 2014 at 7:41pm

In my case, there is a lease beginning Aug 1964 on the property with mineral rights leased (presently) to EnerVest. They pay a very small payment out every once in a while. If I read the lease correctly, it runs in perpetuity.  I believe the well is lat 40.31047 and long -81.46604.  Someone approached us and offered us $53,000 to PURCHASE the mineral rights. I refused, but the other two owners are seniors and want the money. They said "yes" and I'm saying "no", so this buyer just wrote up paperwork for the 2/3 and I'd retain my 1/3. I'm told they don't need my permission to sell their 1/3 each and I can't stop him from buying it.

Complicating factor is that one of the two senior relatives (each owning 1/3)  is a close relative and I am in the will to inherit 1/3 of the 1/3 upon her death. She just told me yesterday, according to the title company and Ohio law, all of heirs listed  on the will and their spouses (the spouses are not listed on the will) have to sign off that it's ok for her to sell. I can't find the Ohio law left and she keeps calling, pressuring for my signature/approval to sell.

Does anyone know of a law in Ohio that she is referencing?  Thank you so much for any help.

Permalink Reply by jason irvine on June 10, 2014 at 9:55pm
My best advise is find a way to purchase it from them. You asked if anyone knows about a law. Yes. They call them lawyers. You need legal advise. Good luck and I hope it works out for you
Permalink Reply by Diane Sutherland on June 11, 2014 at 8:04am

Thank you. I wish I had the money for a lawyer. I approached the idea of gifting part or selling on land contract to keep it in the family as it has been for generations, but they want the cash now. Thanks, again.

Permalink Reply by Diane Sutherland on June 13, 2014 at 10:28am

Thank you. The way it's going is that the two senior citizens (one is my mother and one is my cousin) have accepted the buyer's offer to purchase 1/3 from mom and 1/3 from cousin of 100 acres all mineral rights for $17,600 each. They're signing without a lawyer's review because they just want the $17k.  I am not selling my 1/3 of the 100 acres.

The complicating factor on all this is that my mother's 1/3 Deed is set up so that each of my siblings and their spouses (and me/my husband) have to sign off, giving our permission for her to sell. They're scared to say "no" to mom, so they've already signed off. I'm trying to reason with her, but now her anger is flaring brightly because "I won't let her" sell what's hers. I'm trying to explain that it's likely to be worth much more than the offer. I know you're not my psychiatrist....just thought I would vent. Thanks.

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