How to get $ assessment for land & mineral rights

Hi - How would someone go about getting an accurate assessment of the value or land and mineral rights in PA for estate planning purposes?  We are looking for current and future potential values.  We are currently unleased but think there is undeveloped shale.  Recommendations for assessors are welcome.

Thanks, Lee Ann

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Permalink Reply by Dexter Green on July 14, 2014 at 5:51am

The fast and dirty way is to try to sell the mineral rights.  Get an offer and use that as the baseline.  The not-so-fast and not-so-dirty way is to hire someone to do an appraisal, which is not cheap nor is it something that very many can do here in the Appalachian Basin.  Your best bet is to find someone in the Permian who has a lot of experience and anticipate a hefty bill.

Permalink Reply by Lee Ann on July 15, 2014 at 2:45am

How big is a hefty bill, in your opinion?   I'm an individual small land owner.

Lee Ann

Permalink Reply by Philip Thackray on July 15, 2014 at 3:10am

Lee Ann,

For estate purposes you want as low a value as possible.  I’d go with what Dexter said.  Call the people who buy minerals rights and get a quote.

The IRS will likely try to value your mineral rights at a higher value but if you have a legitimate quote(s) you will have a point to argue from.

If you really want a formal assessment, that will be somewhat location specific.  There is quite a bit going on across a lot of PA counties.   What PA county and township are you in?

Phil

Permalink Reply by Lee Ann on July 15, 2014 at 3:15am

Clarion County.  

Permalink Reply by Philip Thackray on July 15, 2014 at 3:40am

Lee Ann

Call  This Attorney .  She has been recommended on GMS many times.  She is close to Clarion County and should know someone who could assess your property.

Phil

Permalink Reply by Lee Ann on July 15, 2014 at 5:01am

Thank you !

Permalink Reply by RAYMOND bAUMAN on July 16, 2014 at 4:51pm

Any geologist will take  your money  and give you a swag. ( simple Wild ass guess) the value of any  mineral is what another will pay for it at the time of death of the owner.  With undeveloped minerals without a basis to know if it is there $0.00.  When it is developed it has value.  For now and near future only land sales in the area of  similar land will incorporate the value of suspected mineral rights.   Look to Recent Real Estate sales they will provide a basis to  plan on and update it when development is pending.   IRS does not speculate on the value of minerals so don't do their work for them as then your value will be taxed and the value incorporated in recent land sales will result in double taxation of the mineral interest.  My father passes in 1992 with  an oil company owned as a indivual the value was established on existing production not proven reserves or unproven reserves ( undeveloped ).   An oilman's son .  They only try to value Proven assets. Not future assests like trying to tax you on the net 30 years crops. ( that is the basis of  the vlue of your land shown by land sales. PS I have also sold Residential Real Estate  ps this is not Tax advice   or legal advice

Permalink Reply by Zack Smith, Geologist/Appraiser on July 24, 2014 at 2:09am

For estate planning purposes, the IRS uses "Fair Market Value", or the price that a knowledgeable market participant would be willing to pay for the property. In PA, oil, gas, and minerals are legally considered real estate, so you would need a Certified General Real Estate Appraiser to determine the Fair Market Value of your assets. Unfortunately, real estate appraisers, at least in PA, generally can't do mineral valuations because they have no training in the field.

I'm a geologist who works for a real estate consulting company doing this sort of oil, gas, and mineral rights valuation in PA, NY, and OH. Our reports are written/signed by both a real estate appraiser and geologist, plus if there is potential litigation involved we will frequently bring in a petroleum geologist as a third party reviewer.

Our website is congdoncoinc.com or you could call Bob Congdon at (607)757-0435, he could get you squared away on the legal requirements of your intended use.

Permalink Reply by The Hiker on July 24, 2014 at 2:27am

Special case:  If a landowner wanted the lowest valuation for his minerals for estate planning or transfer to an LLC, etc..., and the land contained producing wells, and there was no immediate rush, wouldn't waiting a year or so for the majority (decline curves say ~70% or so) of the gas/oil to be extracted before assigning a valuation be helpful?  I would think at that point the mineral buyers providing estimates of value wouldn't be willing to pay much for what's left, and the landowner would receive a low valuation.  Comments?

Permalink Reply by Zack Smith, Geologist/Appraiser on July 24, 2014 at 4:41am

It depends upon your intended use. If you are establishing a basis going forward you may want the highest possible value, whereas for a transfer that would incur tax liability at present a lower value would be beneficial. You and your attorney or financial adviser would determine the intended use and our Scope of Work would be based upon the advise from your legal and financial adviser.

For most purposes, the relevant value is "Fair Market Value", which for mineral rights is largely based upon income. The longer you are in production the less royalty income you make, in general, so waiting will usually result in a lower value. But again, the process should start with your legal and financial advisers determining what you need and wen you need it.

Permalink Reply by RAYMOND bAUMAN on July 24, 2014 at 12:39pm

He is wrong here especially for the new well Utica and Marcellus  the Initial production may be large but the value is in the income stream, only toward the middle of a wells life does the value substantially  decline.  Also as the formation are proved on the land ( produced)  can the value be determined any one who is telling you different or is trying to appraise undeveloped mineral rights is speculating . To prove this just look at the northern part of the Utica play in Ohio and see the value  ( lease Rentals have  dropped substantially.

Permalink Reply by The Hiker on July 24, 2014 at 2:13pm

Thanks guys.   I'll talk to my CPA.  My goal is to separate the minerals and put them into an LLC.

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