Inheriting mineral rights - how to determine value?

My father owned mineral interests in several Texas localities. My sister and I are co-executors of his will and are required to report a “value” for each of these mineral rights interests for probate accounting purposes in our home state. How do we go about determining a value for each of the interests?

You need to assess if there are wells currently producing on the property or currently producing adjacent to the property and how much future production potential there may be. If the land is not in an area productive of minerals, then the value may be somewhat modest. “Proven” reserves are what is important. Of course, it is possible you have commercial deposits of minerals other than oil and gas: lignite, uranium, etc. Even gravel, sand, stone etc has value.

I could provide you a survey of the areas listing any wells drilled and their status. If you have the legal descriptions including the Survey name and Abstract number you may be able to search it yourself on the Railroad Commission website using their GIS mapping system. http://www.rrc.state.tx.us/data/online/gis/index.php, though it can take a bit of time learning to navigate the records.

Drop me a line and I will give you some guidance.

John Fine jfine@petrotexas.com

Hi. I went through this when my mom died in 08 and I was the successor trustee. There was nothing for our state, but I did have file a return with the Feds. After much dickering with my lawyers, they came up with a figure. I instructed them to knock 100K off of it and send the return for my signature. In a couple of months, I got notice from the IRS that the return had been accepted. When Mom died, oil was about $140. Six months later, it was in the 30s. I took the position that we had to take that into consideration, and it worked. I think the fact of the matter is, is that the IRS doesn’t have anyone who can evaluate these and will accept a reasonable figure. My lawyer has never had a return audited that had mineral royalties on it. I took that approach rather than hire an appraiser which would have cost us thousands of dollars. Just my 2 cents worth… Looking at your wells at the RRC is challenging, but kind of fun. I’ve found the RRC site listed below to be quite useful to check on production figures, etc. It’s not very intuitive to use, however.

Yes, the RRC website is not the easiest thing to navigate. Lots of information, but also lots of errors and bugs here and there. You have to know the terminology to get the best out of it.

John Fine www.petrotexas.com

Bruce Bowe said:

Hi.
I went through this when my mom died in 08 and I was the successor trustee. There was nothing for our state, but I did have file a return with the Feds. After much dickering with my lawyers, they came up with a figure. I instructed them to knock 100K off of it and send the return for my signature. In a couple of months, I got notice from the IRS that the return had been accepted. When Mom died, oil was about $140. Six months later, it was in the 30s. I took the position that we had to take that into consideration, and it worked. I think the fact of the matter is, is that the IRS doesn’t have anyone who can evaluate these and will accept a reasonable figure. My lawyer has never had a return audited that had mineral royalties on it. I took that approach rather than hire an appraiser which would have cost us thousands of dollars.
Just my 2 cents worth…
Looking at your wells at the RRC is challenging, but kind of fun. I’ve found the RRC site listed below to be quite useful to check on production figures, etc. It’s not very intuitive to use, however.