Having worked in the past for The 7711 Corporation, a locally owned and operated oil and gas company, for more then a decade, I still pay close attention to the local news reports on drilling operations.
This morning on KBTX Brazos Valley This Morning, we got to see a preview of tonights special report of the oil boom that’s happening right now. Is this a good thing or a bad thing?
On a local level there are two sides to this issue. I’m not talking about nationally and how producing our own oil reserves is better for the economy or how the more oil & gas we produce here the less we have to buy from other countries. I’m just talking about how our oil boom affects local communities and in particular local land owners.
Some say it’s great. Oil production creates jobs, brings money into the community, increases tax revenue from production, it can even make some property owners instantly rich. All kinds of businesses can benefit from the boom too. They run the range from hotels, restaurants and gas stations to oil & gas supply companies, rental companies, land surveyors, title examiners, oil & gas attorneys and accountants. That’s all great news, right?
Well for some property owners it’s not good news at all. If you bought land in Brazos County and you did not secure the mineral rights when you purchased it, you may be faced with a big, loud drilling rig, with lots of lights located next door to you for several weeks. You will then have to endure several years of trucks barreling back and forth to pick up the oil and you will not receive a penny for your trouble.
It would be great if you were one of the lucky few and received a nice fat royalty check every month but if you did not secure the mineral rights when you bought the property then I’m sorry but you have no rights to the minerals or any money paid for them. In fact you really have very little say in the matter.
A mineral owner has rights to access their minerals. A land surface owner cannot reasonably deny the mineral owner access. With the use of horizontal drilling, an oil and gas company can be drilling several thousands of feet below your property and as a land surface owner there is nothing you can do about it. For more detailed information on the difference between land surface owners and mineral owners and what you can do to protect yourself, check out this post Surface rights verses mineral rights in oil and gas leasing.
If you are a surface owner, whether or not you own the mineral rights and you are approached by an oil company that wants to drill on your property then pay close attention to the surface damage agreement. You will need to think of all contingencies and make sure that you are well compensated for it. There are all kinds of long term issues that can come from drilling operations like access, protecting livestock and pipelines to name a few. This is when I would strongly advise you to consult a local real estate or oil & gas attorney.
The upshot is:
If you are buying land in Brazos county or the surrounding counties, you really should try and secure the mineral rights too. There is no guarantee that there are any minerals below the surface and there’s no guarantee that any drilling company will try to drill for those minerals but if you are going to have to deal with the noise and inconvenience of a drilling operation, then by owning the mineral rights you can at least financially benefit from it. The land may cost you more when you purchase but the rewards can be substantial.
If you are selling land in Brazos county or the surrounding counties, then you should really try and retain the mineral rights. Again there are no guarantees and you will probably have to sell the land for less money but by owning the mineral rights you could be expecting some nice royalty checks in mail any day.
One other note, property taxes cannot be levied on mineral rights. It’s only once those minerals have been drilled for and reach the surface that property taxes can be calculated. So owning mineral rights will not cost you until those minerals can be produced and therefore have a value.