The Benefits of Owning Mineral Rights

Mineral rights, also known as mineral estate, refer to the legal rights of a person to sell, lease, bequeath or give as a gift the minerals found on a piece of property (which may or may not belong to him – either because he/she bought only the rights that will cover whatever minerals may be found on or underneath the land or because he has already sold the land, but not the mineral rights on the land, to another person or firm).

With the boom in the shale oil and gas industry in the US, selling or leasing one’s mineral rights has become one of the hottest issues among owners of property within the shale regions in the nation. According to the U.S. Energy Information Administration (EIA), the top producing shale areas in the country include:

  • the Utica Shale which become a major natural oil and gas and producer in 2013and occupies portions of Ohio, Pennsylvania, Quebec, West Virginia, New York and other parts of eastern North America;
  • the Marcellus shale, which is one of US’s most extensive shale regions and probably the second largest shale region in the world. It spans across parts of Ohio, West Virginia, northern and western Pennsylvania and southern New York;
  • the Niobrara region which stretches across parts of South Dakota, Nebraska, Wyoming, and Colorado;

For these owners, the decision to either lease or sell mineral rights will need to be considered exhaustively to make sure that they will never regret the decision they pursued. For while some caution others never to sell since the amount of profits that they will get through leasing their mineral rights will eventually equal or even exceed the amount offered in a sale, others, rather, decide to sell for the idea of leasing is much riskier than selling.

This is because selling mineral rights guarantees sure, immediate and substantial cash, which is often more than enough to last the owner and his/her family for many years. It will also save the owner from significant tax increases (which he/she will have to keep paying if the rights were only leased).

Leasing one’s mineral rights, on the other hand, may prove a better decision, but only if the land will yield an abundance. A property that will not produce the expected amount of shale oil or gas will immediately decrease in value and turn up a liability, instead of a big asset, for the owner.

Before making an actual decision, though, it is necessary that the land owner understands all the advantages, and possible risks and consequences of selling or leasing his/her mineral rights.