Selling Mineral Rights: A Much Wiser Decision?

Mar 18

The recent discovery of fresh shale gas regions at various locations in the US during the last 10 years may just very well be the solution to the depleting volume of natural gas produced from current shale regions in the US.

Shale gas refers to natural gas that is trapped within shale formations or fine-grained sedimentary rocks. Shale formations are rich sources of petroleum and natural gas and, based on the U.S. Energy Information Administration’s list, the top regions that lead in the production of natural gas for domestic use include: Southern Texas’ Eagle Ford shale; the Bakken shale region, an area that extends from North Dakota to Montana; Niobrara, the region that stretches across parts of Wyoming, South Dakota, Nebraska, and Colorado; the Permian basin in West Texas; the Haynesville rock formation in southwestern Arkansas, northwest Louisiana, and East Texas; and, Marcellus shale, which lies 4,000 – 8,500 feet beneath the eastern half of Ohio, West Virginia, northern and western Pennsylvania and southern New York. This is also one of the most extensive shale regions in the nation and probably the world’s second largest.

The still widening drilling activities in shale gas regions, both in existing and new ones, have tossed big companies in a more intense search for mineral sites. Owners of properties near drilling sites or within declared shale regions are, likewise, cast in the air of excitement due to the possibility that their land holds rich, yet, untapped wells of oil or other minerals. And, to a lot of these land owners (who have never really decided yet), the questions are the same regarding their land and mineral rights: sell or lease?

While a decision to sell mineral rights can mean a possible huge, and readily available, lump sum from the buyer (regardless of whether the land will actually produce or not since this risk will already be on the company which will purchase the land or mineral rights), leasing, on the other hand, might also possibly enable the owner to, eventually, earn the same amount as the sale or may be even more, but only if the property is productive and will keep on producing for a long time.

While some owners never pass the opportunity of grabbing an offer that is very hard to refuse, others rather decide to just hold on to (and lease) their property, while others, still, decide to do both, that is, sell half their property or mineral rights and lease the other half.

Whatever decision may be arrived at, it is always advisable to first get the advice of legal professionals who will help the owner sort through all the documents that state the sale or lease of the property or rights. This is to save owners from deeply regrettable errors committed by some in the past who intended and believed that they were just leasing their mineral rights, only to discover afterwards that the documents they signed were actually closure of sale of their property or rights.

 

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