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Did You Get An Offer To Buy Your Mineral Rights?

By Edited Jun 24, 2015 0 1

 

 

Have you or a family member recently received a letter from a company that wants to buy mineral rights or royalty interests? Cashing any enclosed checks or signing any of the papers these offers include may amount to a very bad decision if oil drilling is about to come to the area.  Due to a number of new oil and gas discoveries having been found around the nation, residents in states such as Ohio, Louisiana, Oklahoma, North Dakota and Texas are receiving letters from lawyers offering to buy out all of the person's "mineral interests" or "royalties" in a parcel of land. Some of these residents were not aware that they even owned any mineral rights or royalties, and considering the proposals to be a windfall, therefore signed the offers and sent them in. Some of these oil and gas royalty and mineral rights companies even send a real bank check, which can be cashed by the recipient. If the check is cashed, this can constitute acceptance of the buyout offer. Unfortunately, many of the people who get these mineral rights offers in mail do not know what they are signing away. Some scam operators reportedly even target senior citizens, knowing that they may not understand the terms of the deal and therefore sign away valuable mineral rights for little or nothing.

Below: Shale oil wells such as this one may earn a property owner thousands of dollars per month.

Shale oil well in Texas

I Didn't Even Know I Owned Mineral Rights


As someone who has worked in the oil and gas industry, I've heard a familiar story more than once. "I didn't even know that I owned any mineral rights, so I thought it was a good deal and cashed the check." Chances are, if a person gets an offer to buy their mineral rights "out of the blue," then someone, somewhere, has a good indication that valuable oil, gas, coal, or other minerals exist beneath the owner's land. Mineral rights "opportunists" often have agents working full-time in county courthouses attempting to locate owners of mineral rights in areas were oil and gas wells are about to be drilled, and then make them a lowball offer.

Since mineral ownership may be separated from surface property ownership, a person may have inherited mineral rights on a few acres from an ancestor literally decades ago, and not have had any reason to know about it until the day that a letter offering to buy those rights shows up in the mailbox.  A person may be only a part owner of minerals under a piece of real estate, however since they don't have "executive rights" someone else may have already made a deal with an oil company for that property, which should entitle the minority mineral rights owner to oil and gas "royalties", or a share in any oil, gas, etc, that may be produced from the property.  In some cases, even a small percentage of mineral rights ownership can be worth millions of dollars. Take for example the real case of the Markham family of Weatherford Texas. Shortly after the Barnett Shale oil and gas boom came to their area, they received a letter from an oil company which informed them that they, as a minority minerals owner, were entitled to a 1/32 share of any oil or gas produced from a 1000 acre property that had once been owned by a relative. The Markhams didn't even know they owned these mineral rights, however language in old deeds and their relative's will made them one of a number of owners of those rights. The owner of "executive rights" which held the controlling share of mineral interests under the property, had struck a deal with an oil company for a share of any petroleum ever produced there.  In the end, the Markham family  ended up receiving oil royalty checks amounting to more than a hundred thousand dollars per year. Had the family simply taken one of many "mineral rights" buyout offers that they had received in the mail, they would have only received a one time payment of a couple thousand dollars.

What should You Do If You Get A Letter Offering To Buy Oil Royalties or Mineral Rights


If you get a letter asking to purchase your mineral rights or royalty ownership, do not simply sign the offer or cash any of the enclosed checks. To find out what is going on in your area, consider joining a landowners forum or other online group.

Next, after you have gathered some information on what kind of drilling activity is going on in your area, take the offer to a lawyer specializing in oil and gas or real estate law, and ask them if it is fair, and what other options may exist, (such as keeping your interests and waiting to see if oil is discovered.)

 

Currently there are dozens upon dozens of "bottom feeder" mineral rights buyers operating in different areas of the United States where new oil and gas discoveries have been found. Many of these new oil and gas discoveries are in "shale formations" which mean that the chances for a well being productive are much greater than in other types of oil and gas fields. Shale discoveries can cover literally hundreds of square miles, and in cases such as the Barnett Shale of North Texas, oil companies drill few, if any "dry holes". Property owners should always perform their due diligence, and carefully examine any mineral rights offers they get in the mail.

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Comments

Dec 26, 2012 1:23pm
iadefeo
This is a good article and a subject that more people should be aware of. I knew of minerals rights from my father, who was an attorney, but many people do not. I wonder how many have signed their rights away and come to regret it.
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