Influx of People Advocating to Sell Minerals

First, I want to apologize in advance. What I am about to say could be 100% wrong, but interesting none the less. I have been a member of this blog for several years. I have never seen an influx of new people like I have in the past few weeks. Maybe the settings have changed and we are now just getting new member notices. I don't remember, but there now seems to be more and more new posts and comment about how it is OK and probably "smart" to sell your mineral rights rather than lease. This is especially interesting considering how many letters I am now getting from people/companies wanting to buy my mineral right. I just thought it was curious. I feel it is never OK to sell your rights unless you are in dire need of money! More importantly, when someone tries to buy just "part" of your rights, upon signing an agreement to "just sell us half", you are immediately vulnerable to a partition suit (at least in WV). Unless you can out bid the big boy, you will lose. Big Time!

Comments?

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Permalink Reply by Nancy Mosley on March 24, 2015 at 3:02pm

Deutchen, if the mineral rights are jointly owned by even two people, "undivided" rights, for the same acreage, then both parties need to sign a lease. If already leased but the lease does not have provision for pooling (necessary for horizontal drilling), then the lease must be modified, by signing a Lease Modification document, by each person leased (or the heirs of the one who signed the lease). If one party wants to change something in the original lease as part of the modification process and the other party does not, the second one can sign the modification document, but the Lessee (company) still needs the modification from the first party. If the second party gets impatient, wanting the first one to sign so the well can be drilled, the second one (the one who signed the modification already) might want to sue the first one, to force the first one to sign (on the company's terms, no changes in the original lease except what the company wants), or force the sale of the first one's property, even with the lease in place.

I think what you are describing, when there is a lease in place and the company does not need it modified, there is no need for anybody to want to partition, as I see it, so I agree with you in that situation.

Permalink Reply by Todd on March 29, 2015 at 7:13am

As a WV land and mineral owner, I would like to thank you all for explaining why selling a portion of my minerals (no matter how small a percentage) could prove disastrous.

Thank You especially to Nancy Mosley and Jim White! :-)

- Todd from Hancock County, WV

Permalink Reply by Nancy Mosley on March 29, 2015 at 1:26pm

Thanks Todd! Lots yet to learn so I read as much as I can. Also had more than my share of odd things to deal with and learn about!

Permalink Reply by Roger Leight on March 27, 2015 at 4:38am

Ok, so it is legal to sell your O&G rights to make a fast buck but there are some questions that you should ask yourself. Do you really need the money so bad that you are willing to create title or other issues for future generations? Yes, many landowners that are paying the taxes on the property find out that they do not own the oil & gas rights for the land that they are paying taxes on and someone else who may not even be a resident of the state is collecting the signing bonus and royalties for the gas & oil under your property. (Many counties in Pennsylvania at one time but no longer do, have a separate tax assessment for oil & gas) Do you or future owners want to continue paying a tax on something that you no longer own? Your paying the tax on the land & the O&G owner is no longer paying anything but taking all the profit. Some of these people or companies that are purchasing the O&G rights never had a claim to the property such as former ownership so the downside risk for them is nothing after they recoup the cost of buying the rights which they should be able to recoup very quickly. If they sign the lease, you the surface owner may have little or no say as to the terms of a lease. There are numerous other issues that I do not have the time or space to include in this post but should seriously be considered.  As I said it is legal to sell your O&G rights but morally I am not in favor of it with certain exceptions such as no other choice to raise money or lose your home or pay medical expenses. There may be some other reasons but think it over very carefully before you sell those rights.  

Permalink Reply by Utica JOE on March 27, 2015 at 10:00am

Roger,

When buying real property, it is the job of the purchaser to perform their due diligence on the sale. If you want to buy a 100 acre tract of land, you need to do the research to see what exactly you are buying (fee simple minerals, coal, surface, water etc.). If a predecessor in title has sold/reserved their minerals rights, it is their right to do so. The argument that the surface owner has a blind entitled right to own the minerals in fee simple under their respective land would also inadvertently challenge a landowners right to lease their minerals (as leasehold is a type of mineral ownership). Furthermore, in most states the landowners pay taxes based upon the sale price of the the real property being conveyed, whether the land includes minerals or just the surface. 

In Ohio, they have the DMA of 1989 and 1991 which revert the minerals back to the surface owner after 20 years of non-development. The Ohio DMA also states that tax parcels be created to tax the mineral owners separately from the surface. I believe that this is a much sounder and reasonable approach than what you are suggesting. 

Furthermore, I agree that selling minerals can and will cause some title issues in the macro sense for years to come. However, that just means the E&P's will need more people to work on researching the land which means more jobs for the area for years to come....

Permalink Reply by Roger Leight on March 30, 2015 at 9:53am

Joe,

I have done a lot of title in Pennsylvania and even some in Ohio. Unfortunately, most people do not have any clue nor do they have the time to do their own title search. In Pennsylvania unless you specifically ask for a check of oil & gas rights (Ohio, oil & gas are covered under minerals, PA is separate)  you may be paying for a title search when you buy a property but those ownership rights may not be searched or covered. I have seen this first hand that one pays for a title search but the oil & gas chain is not completed. I also have personally seen reservations from the 1890's hold up in court even when folks have tried Quiet title or Quit Claim deeds to transfer ownership rights. That said, I wish Pennsylvania had the same or a similar law to Ohio in respect to 20 years of non-development. As for coal PA has the coal acts of 1957 and 1966 to contend with but it should be stated directly on your deed. One last thing that I would like to state is that if you work with a true professional landman "usually an AAPL member or hold AAPL certification" (RL, RPL & CPL) they know their lease inside & out (hard to believe some landmen don't know what is in their own lease) They are willing to work with you to get the addendums that both the gas company will approve and will protect the owner as well as giving peace of mind. Yes, I am a landman and if we can not get you those protections, you don't sign the lease.

Permalink Reply by Joseph-Ohio on March 27, 2015 at 11:04am
How about some good landowner cognizant leasehold terms and no more of those that are one-sided, landowner abusive and end up in the court cases we read about every day on GMS ?

It's getting old reading about all of the horror stories and experiencing the delays as G & O seems to continue to lobby politicians for rules and laws that seem to be designed to completely strip the landowners / lessors of their compensation / rights of ownership.

Let's see the G & O  industry and government (seemingly for a change) work toward promoting a pro-development, pro-drilling, pro-landowner, pro-lessor, pro-rights of ownership philosophy / stance.
Permalink Reply by Martha Ann Murray on March 30, 2015 at 9:04am

I totally agree with you, Jim.  My dear deceased mother always stressed to me that selling your mineral rights is NOT WISE.  She would roll over in her grave if she thought I would do such a shameful thing.  lol

Permalink Reply by Jonathan H on March 31, 2015 at 3:37am

In Ohio and West Virginia, you can sell mineral rights with no surface access, or with limits on surface access, which helps current or future surface owners - can O&G companies sue to force surface access in a situation like this?

Permalink Reply by Dexter Green on March 31, 2015 at 6:04am

If you sell mineral rights without any contingencies then the mineral owner has the right to give surface access to an operator.  

Permalink Reply by Ron D. Jockefeller on April 1, 2015 at 4:15pm

This is one of the stupidest sentences ever written:

    I feel it is never OK to sell your rights unless you are in dire need of money!

It is always OK to sell any economic interest for more than it is worth.

Your comment is a foolish as saying "I would never sell my stocks at any price."

Mineral rights have a value which is not very hard to determine.  If someone bids you less than that value, then don't sell.  If someone bids you more than that value, then hit that bid right away and put your money into something else.

Not capturing value simply because you "feel" something is not OK is appallingly poor financial decision making for yourself and atrocious advice to others.

Permalink Reply by Jim White on April 1, 2015 at 5:30pm

Such sage advice! Spoken like the mineral buyer I'm sure you are.....:)

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