What Are Mineral Rights?
The basic definition of mineral rights is the holding rights to underground resources. Examples of those resources are mineable rocks like limestone and salt, ores and metals, and fossil fuels such as oil, natural gas, coal, etc. It is very important to declare from the start that mineral rights are very much different from surface rights.
Sell your Mineral Rights
Surface rights provide the owner with the right to utilize the land for agricultural, commercial, residential, and other purposes on a surface level. Mineral rights give you the right to make use of any natural resources that you can find underneath the land surface.
There are some transactions that coal companies will pay much for the coal beneath someone’s property. Usually, owners would bite since they don’t have the materials or interest to produce coal beneath, however, a coal company can.
In this example of a transaction, the owner of the property wants the coal to be sold but hold onto the control and possession of the surface. The coal company likes to manufacture the coal but would not want to give a payment to the additional price in order to obtain the surface and its buildings. Therefore, an agreement is done to share the property.
The buildings and rights to the surface will be retained by the original owner, and the company will have rights towards the coal. This type of transaction can demand all mineral commodities either known or unknown that exist beneath the owner’s property.
Mineral Rights’ Worth
The bigger the up-to-date market value of a certain mineral is, the bigger money it is likely to get in mineral rights. However, it can be quite hard to find out how to calculate their exact value, there are definite strategies you can make use of to get a good estimate.
The recommended thing to do could be to acquire a mineral rights appraisal from a professional to get an estimated value of the rights. Another way would be to count the value of the current offers you have received so far.
How Much Do Mineral Rights Typically Sell For?
There is no such average price when talking about selling your mineral rights. In addition, even if your neighbour on the next-door property is also placed on top of similar resources, the price per acre you might get might notably differ from theirs.
For example, you have bought a property on a lease of 25 percent. You then discover an old well that was shut on your property in 1960. Your neighbour, however, has a lease of 12.5 percent on their property. Your neighbour already has five drilled wells that have been manufacturing oil for some years now.
In addition, even if your properties are bordered to each other, the standard price for the mineral rights you have per acre could be better by over $10,000 while your neighbour’s might have not more than $1,000 per acre. This is because you have a lease of 25 percent and your rig is active, meanwhile the property of your neighbour’s may not have much oil left in it, this explains the low offer.
Taxes
This is usually the main reason why the majority of the owners would have their mineral rights sold. For example, the owner has inherited rights worth $100,000. If the owner would be selling them for the price of the same, the owner may only pay around $5,250 in taxes, this means the owner would pocket an amount of $94,750.
On the other hand, if the owner decided to simply collect the royalty income worth around $100,000 instead, the owner would end up paying $30,000 in taxes or more. In addition, it will take a few years in order to collect the amount in royalties.
If you inherited mineral rights, then it would make sense to just sell them instead of keeping the collection of royalties on them.
Control
If you own a stock, real estate or any other type of asset that gives you full control when anything happens to it. Unfortunately, you cannot say the same when it comes to mineral rights. With this, it can make sense to just have your mineral rights sold, acquire the money and use it as an investment in something else worthwhile.
Interesting related article: “What is Intellectual Property?“
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