I’m doing research on how families manage inherited mineral interests; the administrative side of it, not the geology. I’m not selling anything and don’t have a service to pitch as I’m trying to understand this world from the people actually living in it, and this forum seemed like the best place on the internet to ask.
Two things I’d genuinely love to hear about:
Who “handles” the minerals in your family, and how did that job land on them? Was it chosen or inherited by default? And what does it actually involve month to month / what lands on the kitchen table?
Tell me about the last time something went sideways. A transfer after a death that dragged on. A check that shrank, or just stopped, with no explanation. Deductions you couldn’t make sense of. An operator you couldn’t get a straight answer from. Records scattered across counties that nobody could piece together. What did you do about it and how far did you get? If the honest answer is “nothing, it wasn’t worth the fight,” I’d especially like to hear that, because I suspect it’s more common than anyone admits.
Happy to share back what I learn as the responses come in and thanks in advance; I’ve already learned a lot here just from reading.
We ended up inheriting minerals in several counties in Texas, which we have learned to manage. I dove in to mineral management seminars at TCU, gained a wealth of knowledge then on to a landman seminar. Both were good, then I hired a landman during a slow time for twelve weeks to help me run title on properties owned. This was good, I learned a lot but the best thing is the friendship. This has helped me. My landman friend just told me the other day that we have minerals we need to get them leased, and do the best we can. This was after a lease came in with low bonus and royalty interest, so I told him I tossed to the side. After his encouragement, I spoke to the landman making offer and swung a better deal. Just go learn all you can and do the best you can. Good luck
This is exactly the kind of story I was hoping for, thank you. Two things jump out. First, the sheer effort it took: two seminars plus hiring a landman for twelve weeks just to get your arms around what you already owned. Do you think most folks who inherit ever get that far, or do they just cash whatever shows up? Second, it sounds like the real system is your landman friend keeping an eye out and nudging you (the lease you almost tossed being the perfect example). What happens for families who never find that person? Really appreciate the insight here.
I am a fourth generation mineral owner, teaching the fifth and managing our daily workload. When I inherited, I immediately joined the National Association of Royalty Owners (www.naro-us.org) since my parents had belonged to it and raved about how much they learned. I also took NARO classes affiliated with TCU and many other classes offered by NARO and other great teachers. NARO is the only national association that advocates/educates mineral owners. NARO has state chapter conventions in multiple states that have oil and gas, webinars, town halls, newsletters, and a depth of directors who are professional mineral managers and also just plain old experienced mineral owners, so great networking opportunities. The Mineral Rights Forum is also an excellent resource. MRF and NARO are the two most up to date groups! Informed mineral owners make more in royalties. Those folks who do not care to get informed generally make less and are open to being taken advantage of.
Luckily, our family has been in the oil and gas business for over a hundred years with many generations of geologists and mineral managers, so we have an excellent file system and many templates designed to help with documentation and work flow. NARO has a Mineral Manager training set of classes which I found helpful in the beginning and still use as a Certified Mineral Manager. We also have excellent accountants and attorneys. In the last few years, professional minerals management firms have developed which can help families that don’t want to manage their assets on their own (for a price). Various banks and trust offices are also available to help mineral owners.
Everyone who inherits should immediately learn about the resources available in their particular states through government agencies, oil and gas commissions, statutes relating to the production of oil and gas, etc. Many of the resources are free. NARO presidents from various states have given webinars on those sites in the past few years.
HSAV, I represent many families and heirs who have inherited mineral interests, and I do not believe there is any one-size-fits-all approach. Some families manage their minerals very well, while others are still learning. Generally, the best-managed mineral interests are handled by the family members who take a genuine interest in them and remain actively involved.
Much of the process is learned through experience and, at times, trial and error. I often compare owning minerals to owning rental property. You need to pay attention: Is the tenant paying rent? Are the taxes being paid? Did you negotiate the best lease reasonably available?
If you own only one rental house—or one mineral tract—the time commitment may be fairly limited. If you inherit several properties or mineral interests, naturally, it will require more attention.
The most important thing you can do is continue educating yourself and asking questions. No one wants to leave money on the table, but while you are learning, do not be too hard on yourself if every decision is not perfect or you do not capture every possible dollar. Staying engaged and becoming more knowledgeable will put you in a much better position going forward.
If you are examining a Texas chain of title and the original patent date from the state is prior to September 1, 1895, the land is completely exempt from the Relinquishment Act. The minerals belong entirely to the current private mineral deed holders, and the Texas GLO has no jurisdiction over oil, gas, or mining leases executed on the property. [1, 2]
To your second question, from the owners I talk to: mostly nothing happens. The check gets cashed. The failure I see most is an operator change. The new operator rebuilds its pay deck from transferred data, the decimal comes over wrong or the deductions change, and nobody in the family has an old stub to compare against. It goes unnoticed for years because a smaller check looks like normal decline. Are you hearing more about transfers that dragged on, or checks that quietly shrank?
Following up with Lucas. It is so helpful to the future generations to keep your files in good order, have original deeds, leases, pooling order answers and probates or trust documents, keep division orders, keep your check stubs for at least seven years for IRS purposes and for matching against new operator decks. You do not have to keep them in bankers boxes. Scan them and keep them in the cloud so that they can be recovered if there are deaths, weather events, fire, etc.
Both, honestly, but the quiet shrink comes up more than the dragged out transfer. Your operator change explanation is the most specific mechanism anyone has given me. @M_Barnes keeping stubs for seven years to match against new operator decks sounds like the same failure from the other side. Two questions back, because I’m trying not to just collect horror stories. Of all the owners you talk to, roughly what share have actually been burned by this versus it just being possible in theory? And when someone does catch a discrepancy, does the operator make it right without a fight? Also curious what seat you see all this from. Sounds like you talk to a lot of owners.
Thank you, this is really helpful. I guess it sounds like the defense exists, most families just don’t know they need it. Two things I’d value your read on. You mentioned professional mineral management firms developing in recent years. Which ones do owners in the NARO world actually speak well of, and what makes a family pick a firm over a bank trust department or just staying DIY? And the flip side, since you’ve watched generations of owners, how often does the uninformed family actually get hurt in a way that matters, versus muddling through fine? I suspect you’ve seen both.
The rental property analogy is the clearest framing I’ve heard. One question from your seat, since you represent a lot of these families. When things do go wrong, like a bad transfer or a decimal that came over wrong or deductions that changed, is it usually a real dollars problem or more of a paperwork nuisance (and I guess as a percentage is it like1-5% or more egregious)? Trying to understand whether the stakes are typically hundreds, thousands, or not worth bothering over. Appreciate the insights a ton.
Seat first, since you asked: I built Eureka, which checks whether individual mineral owners are being paid correctly and recovers what they’re owed, on contingency. So what I see is skewed toward people who already suspected something, and I can’t give you a clean share. On the fight: clear decimal errors usually get fixed once you show title, and Texas and Oklahoma both owe interest on late pay. Deduction disputes are where operators dig in. Is your research headed toward a paper or a product?
The mineral management groups frequently host tables at various conventions and are online. Owners pick different companies depending upon their needs. Some are more expensive than others or have minimum limits, so that makes a difference. Some families pick a trust group or bank depending upon their needs. Sometimes, folks pick a group that is more local to their area. Some people do not have many acres, so either ignore the issues or manage minerals themselves.
Uninformed owners may muddle along just fine if their decimals on the Division Orders are correct and the operator is taking out deductions properly or not taking them out according to the leases. However, I would hazard to say that since millions of mineral owners are not part of advocacy organizations like NARO, or do not have help from management groups such as firms or banks, attorneys and accountants, they are not informed as to how to get favorable leases, check their decimal amounts and deductions on their checks, they are likely to lose out on royalties that could be theirs. Or they sell when the first offer comes in the mail or by phone and they don’t know they just missed out on multiple horizontal wells that were about to be drilled or they get taken by scams which are certainly out there trolling all the time.
This industry is quite complex and has many moving parts which makes it difficult for the novice to even know what they don’t know and advocate for themselves. I could not quantify what share “get burned” with an exact percentage since the data probably does not exist. I know that I spend a great deal of time hunting down lost wells that used to be in pay and disappeared in a buyout, tracking down title and working with Division order departments to correct decimals, informing companies that I have a hard no deductions lease and they are taking out incorrect deductions, demanding interest payments because checks were late, etc.
Another factor to consider is that many operators use accounting software that is pre-set to take out deductions since so many leases do allow them. It takes energy (which some folks don’t have) to chase down the operators and inform them that their lease does not allow deductions in order to get their portion of the pay deck corrected in the software. Gas deductions can be quite high and even cause royalties to go negative, so that is worth the hassle to get them corrected and return the royalties operators have taken out just due to accounting software.
My family has a trust with minerals and for which am the Trustee, so I deal with all the paperwork etc already but it is not in my name per say at this time. So I am not sure if joining the NARO would work in my favor or not? What do you think?
Quite a few folks in NARO have trusts and they joined to learn how to get better leases, know whether or not to sign Division Orders, network with mineral owners near them and learn the business. There is in an intro membership for a year that you can try and then see if you get the benefit of the webinars, town halls, resources on the website, etc.
Typically, it is a small issue. If it were only a one-time thing, it wouldn’t be much. But keep in mind that production happens every month, so a small error is compounded by every single month of production and could go on for years.
Good timing for this subject. My family has had mineral rights for the last, I think, 50 years, but we are unorganized, disconnected, and confused about our rights, current leases, royalty payments, etc. However, I am organizing a family meeting next week to bring us together to begin sort out and address the many questions we have about our mineral rights. Would love to have a conversation.