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The basics of selling mineral rights

On Behalf of | May 12, 2022 | Gas And Mineral Law, Oil

A property owner in Texas who holds title to mineral rights may at some point want to sell or lease these rights to an oil and gas company. Market conditions change from month to month, so property owners should know the value of their holdings and some of the legal principles surrounding these transactions.

This could help individuals receive a fair price for mineral holdings.

Mineral interest

According to Landgate, when an entity sells or leases mineral ownership, a number of rights transfer to the buyer. The buyer now has the right to explore the property for oil and gas and to drill a well. This entails access to the piece of land and allows the buyer to bring certain types of equipment onto the property. At this time, the two parties will negotiate the financial details of bonus and royalty payments.

Royalty payments

Once the driller puts in a successful well, it will generate revenues based upon the amount of oil or gas and the market price. The seller and the buyer of the mineral rights negotiate a percentage of the earnings that goes to the seller. The industry standard consists of monthly payments from the driller to the owner of the mineral rights.

The decision to sell mineral rights hinges on both personal and financial factors. Property owners might look at favorable market conditions such as a rising price for oil and gas, or they might need to pay off some bills. Many factors, including the profitability of a mineral lease, go into the buying and selling of mineral rights.