Today, the phrase "to sell your property rights" is not the same with the statement "to sell your mineral rights." It is not the 1900s when both the above and underground spaces of a residential property came under one deed or document. This is partially because the owner of the land might not be interested in the oil beneath, but an oil firm is.
If you are planning to own/lease or if you are unclear about the benefits to sell mineral rights, below are 5 benefits you need to consider:
1. Selling is more beneficial than leasing:
Compared to leasing, industry experts believe that selling is more beneficial for the following reasons:
Receive 2-5 times the monetary benefit from selling vs. leasing
Collect cash infusion immediately instead of waiting many years out for production
Hedge the risk of non-producing assets
No hassle, eliminate accounting, and prevent tax and income implications
Avert impact of fluctuations in oil and gas prices
2. Knowledge on state laws:
If you are considering mineral extraction, you need to have a good knowledge of mineral extraction laws in your state. Most states have laws that govern mining and drilling activities that vary from one state to another. In addition, there are also many legal issues to be aware of with respect to ownership and production on mineral rights.
3. Reputation and track record of the leasing company:
This is a very important consideration while you are leasing your mineral rights. Many companies that lease do not intend to drill a well, stranding owners with a nonperforming lease that they cannot escape. Potentially they may receive little or no income throughout the lease. Even if drilling occurs, it can sometimes take several years to benefit the owner making it better to sell your rights and eliminate all risks related to ownership.
4. Understanding the agreement:
In most transactions, the leasing company prepares a contract for your signature. Leasing documents contain many clauses which are difficult for those not in the business to understand. There can be many potential pitfalls that can affect the owners by signing a bad lease. Mistakes can be made by an uninformed mineral owner in these agreements. Again selling eliminates the risks associated with signing bad leases.
5. Rights of surface owner:
In many cases, mineral rights and surface rights are owned by two different parties. If you own both surface and mineral rights, you can benefit by selling the mineral rights but keeping the surface ownership. Basic rights are provided by the state laws. You will have sufficient protection for crops, livestock, buildings and personal property. This can help to bring in cash for the current needs but retain ownership in the surface for the long run.Read here for more information.