Understanding What Mineral Rights You Inherited Is The First Step

Mineral Rights Fragmentation

There’s an interesting phenomena unfolding every day with respect to America’s minerals. They’re becoming divided into smaller and smaller ownership pieces – a process called fragmentation (aka fractionalization). As each successive generation comes and goes, mineral rights tend to get split, and split, and split again. For example: Great grandfather owned 100% of the minerals underneath the farm. He left 25% to each of the four kids, who in turn leave their respective 25% to each of their children, who in turn do the same. Get the picture? It is commonplace today for individuals to own small (and very small) fractions of mineral interests. The administrative oversight demanded of small interests is often one reason people sell their mineral rights and inherited mineral interests.

Do I Own Mineral Rights on Inherited Property?

Like many answers, it depends. (We’re assuming here that you are the surface owner). It depends simply on whether in the past the mineral estate (the mineral rights) have ever been severed (separated, removed) from the surface estate. There is a determinable answer to this question, although at times it can be complex and take considerable time and effort to confirm. Typically, an oil and gas landman is the professional discipline that researches and identifies mineral rights ownership. This process of researching the ownership is commonly known as running (researching) title.

Landman – Who’s That?

In order to identify who owns the minerals underneath a tract of land, oil and gas companies employ people commonly known as Landmen. A Landman’s basic role is that of researching the land records (often called real property records) contained in the county courthouse, determining who owns the mineral rights, negotiating with the owners, and then preparing and presenting the oil and gas leases for signature(s). Typically, landmen work on a contract basis either individually or for a land brokerage company who is Typically landmen work on a contract basis hired by the oil company. There's an important point for mineral owners to consider when engaging the service of landmen. It is this. By the simple fact of the way the industry is structured, oil companies employ the great majority of landmen; thus with any anticipated work, it is important that mineral owners establish up front that there is no conflict of interest involved in your particular situation.

I’ve Just Received a Lease in the Mail

Often, the arrival in the mail of an oil and gas lease proposal is the first time people even become aware of inherited mineral rights, and thus have reason to educate themselves about the matter. Generally seen as a welcome inquiry, a lease proposal prompts a number of questions.

• Is this a fair deal?
• Do other family members know about this?
• What is the “going rate” for royalty percentage and lease bonus payments?
• Do I need to hire an oil and gas lawyer, landman, or accountant?

Receipt of a lease proposal can be an exciting thing, yet getting the best deal available will require some effort on your part. Part of that effort is that of being smart enough to realize that you don't know what you don't know. Seek out and qualify competent professional help when you know that you need it. Inheriting minerals can be a great blessing, yet like any asset, inherited mineral rights require a little love and attention.

Additional Reading

• Unclaimed Oil and Gas Royalty – Explanation of how to recover your unclaimed oil & gas mineral rights and royalties. Includes links to state unclaimed property websites.
• Division Order – Explanation of oil and gas Division Orders for mineral, royalty, and overriding royalty owners. Answers to questions, definitions, and sources for help.