Mineral rights Sec 16 Blk 32 T-2-N Howard County


Hello! I am new to the forum and to the overall topic. I have recently been notified that, through an inheritance, I am a part-owner (3 heirs) of mineral rights and have received an offer from a company to purchase the rights. How can I find out more about this particular section, whether there is drilling on or around it, etc. Thank you for any guidance you may be able to provide.



Surge Operating has 1 approved permit for a horizontal well(API 227-39721) beginning in Section 9 and ends in Section 16.

Encana Oil and Gas has 6 approved permits(API 227-36920-21-22-31-32-33) for horizontal wells beginning in Section 9 and ending in Section 16…a lot of activity and several good producing oil/gas wells in the surrounding area.

The major operators in this are are Encana Oil and Gas, Sabalo Operating and Surge Operating.


GIS map of Howard County Section 16/Block 32 T2N/A-1065 and surrounding area:


Clint Liles




Clint_Liles gave you some very helpful and valuable information, but there is more to know. 3 of the permits are on StateWide Rule Hold, which means there is a problem with the permit paperwork. Sometimes that is rectified very quickly, sometimes that takes a year or more if there are parties contesting the permits. All that said, what you know today is that there is activity in the area. The rest of the story is that it usually takes about a year from the time a permit is approved to getting your first royalty payment. If, and only if the well gets drilled. A permit is not a guarantee that a well will be drilled, while it’s a good indicator, it’s not an absolute. With oil prices in the tank and pipeline capacity strained in West Texas, I suspect a good number of permits won’t get drilled, but that’s a personal opinion only. The activity level in your area does bode well for a higher valuation if you are inclined to sell. It’s a fairly easy math problem to figure out if it makes sense to sell, but first, you’ll need to understand exactly how much you own in the Section. I hope this information is helpful for you.


I’m a lessor on section 16, part of Grandpa’s old cotton farm. Don’t know where your property is. Might be the Scott unit on the east.

The west part of sections 9 and 16 comprise the JONAH UNIT A 09. 640 acres, about. So can take four horizontal wells. Surge has two wells permitted here to the west, without problems.
Encana applied for the other two in December and yesterday submitted a revised version of one of Surge’s wells http://webapps.rrc.texas.gov/dpimages/img/4200000-4299999//PR0004283072_0001.PDF

Other than this, I can find no evidence that Surge has transfered the Jonah unit to Encana. Possibly, they are in some sort of partnership, explaining why two different companies are submitting permit applications on the same unit.

Or perhaps Encana is the drilling contractor. Encana has some really fancy technology. and claims to favor drilling several wells together as a unit. They claim incremental costs of about $7+/barrel to produce oil on the Permian. Which means their wells are going to be profitable at fairly low oil prices.

Allegedly, one of Surge’s wells (1AH) was spudded-in August 18. Haven’t heard anything more about it. This is some pretty hot acreage. I regularly get offers to buy my rights for $25K/acre, which I consider far too low for property which (allegedly) has a well on it. .

BTW, my preferred approach to this situation is not to sell, but to lease. Unless you need the money right now. The real money to be made is not from the bonus, but from royalties, whihc can be substantial. . In fact, I took less than I likely could have gotten as a bonus in return for assurances that the well would be drilled soon.


Thank you so much for your reply. Being completely ignorant on these matters, I understood very little of what you said LOL but did take away that I should probably speak with an o&g attorney. I figured there must be something going on since they are offering $25K each for our shares of the mineral rights. I will continue researching – not in a hurry to sell. Is there a map where I can see exactly where this property is? Thank you!


Thank you so much! I am not in a hurry and need to understand all of this better so I will continue to research.


Thank you so very much - this has come as a big surprise so I don’t even know where to begin. I am legal guardian to the minor child of a deceased heir so it’s a little complicated (I think). Anyway, I have seen your posts on several other forums and am glad you responded to mine. I’m not in a hurry and just now beginning my rsearch so not sure of next steps right now. Thank you


Howard County

Section 16/Block 32T2N/A-1065 is the blue square North of Big Springs.


Clint Liles



FWIW-- According to this plat http://webapps.rrc.texas.gov/dpimages/img/3900000-3999999//PR0003963254_0001.pdf , Encana and Surge (Mosscreek does their leasing) are in cahoots in both the Jonah and Scott units. Which is why Encana is applying for permits on what I was orginally led to believe is Surge’s Jonah production unit. We shall see if they also apply for a revision of Jonah 1AH, Surge’s last permitted well.


Are you still looking for a landman?


We have 30 royalty acres on section 16 on the Jonah unit. Basically, the toe of the '721 well. (S/3 section 16, blk 32, T-2-N, the west 30 acres)

The money here is from production, not the bonus. So, in August, we leased this to Surge at a real discount on the basis of a promise to drill on the Jonah production unit within a few weeks. Still unclear whether this happened or not. I would be happy if the well is “drilled, uncompleted”. Surge is being a little vague on this. In any case, should immediate commencement of drilling be used as an inducement to sign, it is a good idea to write it into the lease.

However, more recently, we have received an offer to buy “1.07 Net mineral acres”, using the same property description. It is unclear whether this is included in our original parcel or is a separate one. The offer seem to be to me and my brothers as descendents of Lee Proctor, rather than to my wife and I, whose name is on the 30 acres. This makes me wonder if it is an entirely different parcel, snooped out by some landman. Is there some way I can find this out?


Publius, you are using “Royalty Acres” and “Net Mineral Acres” interchangeably in your post and they aren’t. You may very well have 30 royalty acres and only have 1.07 net mineral acres. Royalty acres are just the income side of the mineral rights (you can’t and don’t lease royalty acres), while net mineral acres include executive rights (the rights to lease and receive lease bonuses) and may include royalty, but not always. FYI, you can always ask the person that made you the offer to send you their chain of title so you can verify it. That would tell you a lot. Surge is THE worst Operator to deal with from my experience.


Texas_Owner and Publius, I wish you all would use your real names and if those are your real names, I am sorry. Texas_Owner, you raise a good point and one that I see people confused about, even those that are quite knowledgeable.

Say there is a 604 acre section. This is also a square mile Say your family owned 100% of the minerals and the first generation died, leaving this asset in equal parts to its 4 children. Each child now owns 1/4 of the minerals (160/640 over then entire square mile). Now one brother is very excited that he is now going to conquer the world and he is not about to let this landman ride out of town without having leased his 1/4. The landman tells this one that they are doing deals at 1/8 royalty, that is how it has always been and some people just fool around. So assuming that the full section is a unit, this individuals RI is 1/4 x 1/8 or 1/32.

Now the second child also leases and this child leases its 1/4 interest in the minerals for a 1/4 royalty. Therefore this ones RI is 1/4 x 1/4 or 1/16.

Now arguably the second child cut a better deal to the tune of twice as lucrative. The second child’s value is going to be 2x the first child.

Now, this is where I think I am correct but I welcome clarification. the first child has 160 Net royalty acres because net royalty acres is based on a standard 1/8 royalty. The second child has 320 Net Royalty acres because his deal was a 1/4 royalty so it is 2x the standard 1/8.

So if the going rate is $10,000 per net royalty acre, Child 1 will get $1.6 million while child 2 will get $3.2 Million.


Yes, I know the difference between royalty acres and net mineral acres. The point is that I just got an offer to buy 1.07 “net mineral acres” (sic) in a property we already have under lease. Just trying to find out why.

BTW, we own this property free and clear with no encumberances and it has not been leased since the early 80’s. When I called them, they told me that this is different from the property we already lease. Your suggestion of just asking them to show me their chain of title is the next step. But, still learning the ins and outs, I want to poke around a little first.

As for Surge: Arguably, they messed up the original permits for wells 1AH and 2AH on the Jonah unit and this is why the well was not drilled immediately, as they assured would happen.

Thus, Incana (who seems to have taken over the Jonah unit) just reapplied for the permit for the 2AH well, which has “unleased” property. So they need to send out the notices, etc. The plat says this “unleased” property extends over into the bore path of the 1AH ('721) well, which is listed as “proposed”. So presumably this one will also need to be resubmitted in the same manner. So it goes. BTW, I was told that the ownership of section 16 is “complicated”.


William_Douglas_Archer you are correct. Minerals leased at 25% (1/4) are valued at two times more than what the same minerals would be valued at if they were leased at 12.5% (1/8th), with only a few caveats. The primary one being that “royalty acres” or simply “royalty” was severed from the minerals and sold back in the 1950’s. It’s possible to own X net mineral acres and own absolutely ZERO “net royalty acres”.

There is no easy way to explain “net royalty acres” but I’m going to do my best to make it understandable for those that may be scrolling through this conversation. An unleased mineral acre has 8 “net royalty acres” or 8/8ths. DO NOT confuse this with a “royalty acre”, while similar to a “net royalty acre” a “royalty acre” is different. I’ll explain that another time. When someone leases that mineral acre at a 12.5% (1/8th) royalty burden, they are keeping 1/8th of the royalty (1 net royalty acre) and assigning the other 7/8ths (7 net royalty acres) to the Operator producing the well. However, if you signed a 18.75% (3/16ths) lease, then you would retain 1.50 net royalty acres and the Operator would have 6.50 net royalty acres. By signing a 25% (1/4) lease, which is by far the most popular today, a mineral owner would have 2 net royalty acres and the Operator would have 6. So, William_Douglas_Archer, you are absolutely correct, minerals under a 25% (1/4) lease are twice as valuable as those under a 12.5% (1/8th) lease. But why?

A mineral buyer or real estate investor (don’t get confused, minerals ARE real property), look at cashflow and cashflow potential over the long term. Royalties are paid based on the number of “net royalty acres” you own, period. Having twice as many “net royalty acres” from a 25% (1/4) lease means that your income will be twice as much as it would be if the lease was 12.5% (1/8th). This makes the cashflow potential twice as high and therefore the valuation will reflect that.

This is a confusing subject, no matter how you explain it.


Texas owner let me ask you this. If you sell mineral rights for lets say 3ook . you say its real property can you reinvest in a new home for yourself for lets say 300k and pay no capital gain taxes on that 300k ?


Thank you so much for your explanation. I agree with you, this is a very confusion subject. Like many on this forum, I learned we have royalty rights by inheritance from a great grandmother. Nice surprise but it has been a struggle to become educated. I hired a landsman to determine exactly what we have. I have had offers to purchase but have refused. Now I am stuck, I have not been successful learning to navigate the Texas Railroad Commission website or learned to find the map and information that Clint Liles supplies. btw Thanks Clint! I do not even know how to find out what activity is in our area. If you can give any insight, I would greatly appreciate it! Thanks, Lisa Love


Timmyd, I don’t think that you can like kind exchange into a residence to live in. Now you might be able to transact into an investment property but you need a professional to determine that.


Good Morning Lisa. Could you provide me with the Section, Block and/or Abstract number? I will see what I can dig up.

Clint Liles



timmyd, minerals and royalty are considered real property and do qualify for 1031 Exchanges. However, a personal residence is disqualified from a 1031 transaction. I just completed a 1031 where I sold some minerals and purchased a rental property. I speak from experience on this. Make sure you run the numbers with your accountant, if you don’t have an accountant, GET ONE! It’s too important to try to do yourself. Sometimes the numbers simply don’t work out to make a 1031 exchange worthwhile, depending on your income for a given year, you may be able to do a straight transaction (not a 1031) and get the same net result with a whole lot less headache and aggravation.

I buy minerals when it makes sense and sell them when it makes sense. Unlike some, I don’t want to bet everything on Oil & Gas, with the sky-high valuations of today it makes sense for me to take some of that money off the table and put it somewhere that is a little more stable. All that to say, I am about as well versed as anyone when it comes to these types of transactions and I can tell you that a 1031 is not an easy process and you can find yourself making some really bad decisions if you don’t have a very clear plan from the outset. One more piece of advice, there are A LOT of 1031 intermediary’s out there and only a few that understand mineral transactions and even fewer than that that are really good. My advice if you are interested in doing a 1031 is to have a frank conversation with your accountant and talk with an attorney at your local Title Company/Abstract Office and ask them for recommendations on 1031 intermediary’s. DO NOT ask a realtor!

This is probably a lot more information than you expected but it’s a really important topic that can be really good or it can turn out to be a nightmare.