I’ve been posting a lot here, as I’m doing my best to educate myself about the mineral rights I have just inherited. So far this forum has been very helpful!
Can anybody tell me how to determine which type of mineral rights you own?
(Googling around, I found that there are 6 types of rights. I listed them below)
Six Types of Mineral Rights:
Mineral Interest (MI)Owns the minerals below the surface and has executive rights to explore, develop and produce the minerals.
Working Interest (WI)Rights to explore, develop and produce minerals granted by an oil and gas lease but also has the obligation to pay expences.
Non-Participating Royalty Interest (NPRI)Carved out of the working interest, ORRI is in interest in the proceeds from the sale of minerals rather than an interest in the actual minerals.
Royalty Interest (RI)Rights to receive revenue from the oil or gas well production without additional rights of participation.
Non-Operated WIRights to explore, develop and produce minerals granted by an oil and gas lease but also has the obligation to pay expences.
Overriding Royalty Interest (ORRI)Carved out of the working interest, ORRI is in interest in the proceeds from the sale of minerals rather than an interest in the actual minerals.
The type of mineral rights you own will be determined by the title chain of how those minerals got to you. Without seeing your granting, cannot comment particularly. (Some of the ones you listed above are not mineral rights-royalty interest is a right to revenue, but not the actual minerals). In the United States, you have to go back to the patent which is the first granting of the rights. Originally, the patent would grant both the surface and mineral rights as one ownership called “fee simple estate”. That gave complete ownership. Over time, those rights can be severed into several pieces. Here is an excellent article with pictures that can give more insight. Mineral Rights | Oil & Gas Lease and Royalty Information. Your inheritance documents wording and the title chain that led to them will tell you what you own.
Thank you. I guess the reason why I am asking so many questions is that I got no inheritance documents. All I got was a scanned 1-sheet paper that showed the 2 sections ( listed by section, township, range) and literally nothing else. So the only thing I know is that my father was receiving royalty(?) checks from his mineral rights and that he transferred those mineral rights over to his children, so now supposedly we are supposed to receive royalty payments.
Beyond this, all I know is what I have been googling and reading about here. I do plan on calling the county clerks office tomorrow to see if they can give me some more clarity.
When I asked “how do I know what types of mineral rights I have?” what I really should have asked was “What are teh steps I need to take to determine the types of mineral rights I have?”.
I know that nobody here could tell me what type of rights I have, I wasn’t really asking that. I just don’t even know where to start to go about figuring it out. Like - who should I call? What should I ask them? Who is the person in the world who keeps track of these things?
So far I"ve been told the county clerk so I’ll call them tomorrow.
When you said that your dad transferred the mineral rights, you need to track down that document. Was it a deed? If so, then the deed will state what was transferred. That deed should be filed in the county where the minerals are. Was it a probate? Same thing. Document should be filed in the county where the minerals are. If there was an attorney involved in giving you the piece of paper, then call them and find out what course of action got to that point.
Depending upon the state law, the mineral rights are the rock, the pore space and the fluids in the pore space from below the surface to the center of the earth. (State law determines water rights which vary from state to state) Mineral rights include royalty rights which is the right to get paid from any “mining” done on your rocks. That could be oil and gas production, coal bed methane, coal, gold, silver, etc. Some mineral rights have executive privileges which means you get to make the decisions on whether to lease or not. In other cases, you might have the minerals, but no executive rights and would have to abide by the decisions the executive rights owner made-fairly rare. If you have executive rights, you may be able to lease (or you may be held by a previous lease from a previous owner) or you could be force pooled depending upon your state law. If a well is drilled and is productive, you have the rights to the portion of the money received by the sale of the products according to the terms of your lease. Think of a condo (only it is below ground). You own the space and can choose to sublet the space to someone else for a period of time. You still own the space and they rent it for a fee for a certain period of time in return for a bonus and a royalty. Since they are depleting your value by extracting the value of the oil and gas, they need to pay you a royalty for doing so. (And you get a tax depletion-subject for another day). The operator usually takes about 75-87.5% of the royalty because they take all the risk of drilling and developing. The mineral owner is now a royalty owner since there is production and gets the remainder of the royalty because they are passive and take no risk. The mineral owner can share part of the royalty with anyone they choose-such as a child- by executing a royalty deed. The operator/working interest owner can take all the royalty and keep it, or share part of it with a landman or geologist for putting the deal together (overriding royalty interest) which is taken out of their working interest share and not the mineral owner’s share. A working interest owner is anyone who puts up either money or minerals in order to own a portion of the risk and return from participating in the well. Yup, it can be a bit complicated.
Yes, it was just a a “mineral deed”. I looked at it on the county clerk records online. It consists of all of 2 lines. The 2 lines of each section. Nothing more. It has my and my siblings’ names and then the 2 sections listed by section, township, range. Nothing else.
From what you’re saying there is probably some other document that I don’t know about. All I know is that my father purchased these mineral rights from HIS grandfather over 50 years ago. Lordy knows where that original document is.