Deed Granting Mineral Rights and The Value of the Mineral Rights - Attorney Requests

North Dakota Mineral Rights McKenzie County, ND
1

Hello All.

I am at my wits end. I seem to be hitting nothing but roadblocks.

First the story: My mother passed away 3 years ago. The mineral rights she inherited years ago became an asset of the estate. An attorney has given us a to do list. They are trying to save us on attorney fees by having us do some of the leg work. The estate has no assets other than the mineral rights. The to do list: (1) "Who owns the property now? The deceased owned the mineral rights. Get a copy of the deed that granted the deceased the mineral rights. Have them mail a copy of the deed to you." I was instructed to call the McKenzie County Recorder, which I did. They reluctantly told me they could do a property search. They would only do it at the end of a day and after there other work had been completed. It could take 1-2 weeks. They will let me know the fee involved after the search is done for copy fees, etc. (2) "Call McKenzie County Guarantee and Title Company, and ask them who can estimate the value of these mineral right for us." I called them, and they said "they don't do mineral rights." They gave me the name of 3 businesses that they said did. I was only able to reach one and I left a voice mail on the other two. The one that answered the phone said they don't do evaluations, but he would have his boss email the name of someone who does. So far no email. I have had no response from the other two either.

So, I need some help trying to find the information noted above. Any guidance or possible referrals would be greatly appreciated. I don't know how to proceed from here. We need to get the mineral rights into the estate so that the lease signing bonuses and any future royalties can be used to payback Medicaid for end-of-life care and the heirs can eventually have individual ownership. Both mineral rights areas are in McKenzie County but different townships.

Thank you.

Signed, Frustrated

2

Mr. Ward, a few comments. My family had land in McKenzie County for years. We finally sold it, retaining 90% of the mineral rights. Those rights are retained for, I believe, 15 years, and then must be renewed. So, the first question is, when did your mother obtain the mineral rights, and did she, if necessary, renew them? I renewed mine after about 10 years of obtaining them, after the area became active in drilling. My family had a pretty good record of our family history of owning the land, which was from probably the 1930s. If you live anywhere near McKenzie County, I would suggest you to go Watford City, and search the records for yourself. It’s actually fun. We’ve done it while searching family history at other county courthouses. I think the County people would be happy to get you started. Now, as to the value of mineral rights. It of course depends upon where your mineral rights are. We were originally offered $2000 per acre, and 20% of our share of the oil. We received a later offer for $1000 per acre, and 20%. The first question, of course, is whether or not there are already producing wells on your property. Have you a legal description? Our rights, for instance, are Township 150 North, Range 101 West, Section 6. If you have a similar description, I’d be happy to check the NDak map to see if there are any wells currently producing. Or, if you’d rather, tell you how to do so yourself. I should add that I chose not to lease, but to participate in the drilling costs of the well, which means a hefty amount up front, depending on your percent ownership of the size of the drilling area (probably 640 or 1240 acres). It also means that I get 100% of my share of the oil as it’s produced each month.

3

Robert, to start with, if the minerals are severed from the surface, the surface owner is irrelevant, I would tell the attorney so.

When did your mother inherit the mineral rights? If it were after 1990, a deed would probably be in the electronic records, searchable online with a NDRIN Recorders Network subscription of $25 for one month.

Are you certain that your mom inherited from a probated estate? If the person mom inherited from did not have their estate probated, there probably is no deed to find and you now have two or more estates that need to be administered in which case I would suggest a quiet title action instead of multiple probates to first get the minerals deeded into mom's name and thence into the trust, quiet title could do it in a single action saving time and money over multiple probates.

Valuation is a tough one, I don't know anyone who could do that for you. My father passed in 1998 and the probate lawyer told me I may want to get a valuation and I told him not to worry about it, I'm not selling and I'm not worried about setting up a basis for capital gains tax in case I sell in the future. Unless the estate is large enough in money terms, I doubt the judge will be extremely strict about the valuation, keep it believeable. Perhaps you have some purchase offers, I would place the value per acre $1,000 higher than the highest offer.

Robert, I feel for you. Think about this, if the lawyers really need valuations, surely they have done probates before? Shouldn't they be able to tell you someone who actually does valuations?

Someone else in your position [needing a valuation] got a landman to say the acres were worth 5 times the lease value, unfortunately at that [2012] moment I don't believe that it was true. Two wells that don't look like they will recover the cost of drilling were drilled in spacings bracketing the minerals in question, drastically reducing the value of those mineral acres. I told that person to tell the landman SOLD! Will that be cash or check? The lease bonus was from 2008 when it was not known how productive the acres would be, they could not lease the acres for the same amount being bracketed by two bad wells, if they could lease it at all.

Sorry I couldn't be more help but I hope I helped a little and maybe gave you something that leads to an idea of your own. I definitely would talk to the lawyer again, asking about the valuation, why you need it and the standard it has to meet to be accepted, also why they can't tell you who to go to? I wish I had another lawyer to send you to, the one that handled my fathers probate is now a judge and can't practice law. Good luck.

4

Hi Ed.

Both parcels are currently under lease. One expires next month and the other a year from now. So the mineral rights must have been renewed, probably by a re-lease every few years, I would guess. She likely obtained the mineral rights when her mother died in the 1960's. Her father died years before that. The actual land of the one parcel is still owned by her brother I think. The closest town I believe was Grassy Butte. I live in western Oregon, thus far removed from the area. Therefore why I was trying to get someone to advise me as to how to proceed to get the information I need. The mineral rights value are likely very time sensitive, i.e. depends on production in the area, etc. The trick is to get someone to evaluate that for us and then take that value. The legal descriptions of the properties are:

Township 147N,Range 99W,5thPM/ Section 34:N2

14.54545 net mineral acres. Currently at 3/16 royalty. Lease expires 4/2014

Township 145N,Range 100W,5thPM/ Section 1:lots 1.2.3.4.S2N2,S2

Section 11:all, Section13:all, Section14:N2

14.54545 net mineral acres. Currently 1/6 royalty. Lease expires 4/2015

We also have mineral rights in Richland County, Montana, that passed to us children from our father (parents were divorced). That all appears to be in order.

Thanks for the info, and anything else you can share is appreciated. Bob

5

Thanks for your advice Mr. Kennedy. Always appreciated.

This is obviously going to be a process. Bob

6

I recently used Mike Maus, an attorney in Dickinson, ND to probate mineral rights in Williams and McKenzie Counties. He is very effective and his pricing is fair. maus@mnattys.com or 701-483-4500. It may be worth a call, Gail is his assistant and very helpful. He did all the work but it does take some time, it is just the nature of the beast and the amount of activity in ND.

Bob

7

My Dad died in 1973, ND made Mom pay estate tax in 1982, long after they had conveyed 25% of the minerals at land sale in 1971, and no set value was placed on the minerals, so what is ND trying to pull nowadays?!

Bob Kelley said:

I recently used Mike Maus, an attorney in Dickinson, ND to probate mineral rights in Williams and McKenzie Counties. He is very effective and his pricing is fair. maus@mnattys.com or 701-483-4500. It may be worth a call, Gail is his assistant and very helpful. He did all the work but it does take some time, it is just the nature of the beast and the amount of activity in ND.

Bob