Understanding mineral rights can be tricky sometimes. However, if you own a piece of land, you need to know what mineral rights are and how they work. Let’s consider if someone discovers oil or gas on your land, energy companies would be the first ones to send you interesting deals. This is where you need to understand the art of negotiating, as you strive for the best deal possible. In this 21st century, oil and gas have immense value. Yet, there are several risks that you should consider before making a deal.
What are mineral rights?
Sometimes you own the mineral rights to land but have very limited information about what mineral rights are. They are simply the ownership you have of the minerals below the surface of the land. The minerals might include gold, copper, and gas. The mineral rights owner has the right to extract and use the minerals buried underground. However, sometimes an agreement to buy mineral rights only includes specific types of minerals. Yet, the most commonly extracted and bought minerals are oil and gas, as they are of great value. Don’t get confused between mineral and surface rights, they are a bit different from each other.
Here are the tips to keep in mind before agreeing;
Research about Buy or Lease Agreements
Buy or lease agreements are two different entities and you need to understand both of them properly. If a discoverer finds oil and gas on your land, they may offer you a deal to buy the mineral rights. There are higher chances that the discoverer might offer a lease agreement as he has a limited idea of how much oil and gas is buried in the ground. So how does the lease agreement work?
When you sign a lease agreement, you get a tiny down payment and when commercial drilling starts, you attain royalty payments every month depending on the quality of oil and gas produced from the land. Usually, the royalties are 12.5% but if you have experience in this field, you can surely double the percentage too. Lease agreements are one of the most common types of agreements made if they discover oil and gas on land you have mineral rights to.
Negotiating is surely an art. Before making any agreement, do your research. Understand every aspect of the deal and then negotiate for your benefit. However, if you have minimal knowledge of mineral rights and how things work. Hire someone expert in this field. Big companies will make you confused with their offers and you won’t be able to resist, but a skilled negotiator will be able to get out the best deal for you.
One of the biggest mistakes made by mineral rights owners is having trouble saying “No”. Suppose you’re not getting a fair deal for the oil and gas discovered from your land, just say “No” and wait for the next deal to arrive. Compare the deals you’ve got and then make a decision.
Taking into consideration the Safeguards
Having mineral rights as well as surface rights burdens your shoulders with more responsibility. If you’ve got both, you need to protect your property from any kind of harm coming from the drilling operations. Several drilling companies do not care about your property and complete their operations swiftly. You need to make an agreement with the drilling company that it will repair the damage to the property.
The company should not hamper the environment of your land by troubling the water supply or leaving the equipment or material on your land after leaving. Drilling with weak or faulty machines can also result in adverse events.
Make a Decision
Selling your mineral rights is more beneficial than leasing. Royalties are often considered a gamble that may trouble you in the future. A guaranteed total payment may benefit you much more. In case the oil of your land comes to less than the expected value, the lease value would also decrease. However, if the well is filled with value, the lease option would benefit more. You need to get real stats to make a decision.
If you have plans of selling mineral rights, trustable companies would offer you a decent deal. Yet, if you are confused and want a lease agreement, try negotiating the length and size of the signing bonus as well as the royalties. Read all the terms properly before signing it. Choose a company that has happy customers, check their reviews and analyze their credibility. Selling your mineral rights for maximum profit and value can surely change your life. It’s better to consult an expert before making a deal. There are always some risks that exist, but don’t be pressurized by them.