I own 100% of the surface of a 110 acre tract of land and 100% of the minerals in Texas. I want to sell the surface only and reserve all of the minerals, including the surface rights for future oil and gas exploration. The property is currently not under an oil and gas lease and there has only been a small amount of oil and gas activity some year’s ago in the immediate vicinity.
I realize that most drilling today is horizontal and that an oil and gas company would not necessarily need the surface to drill. However, I do not think that giving a 100% surface waiver to a buyer would be in my best interest, in the event a portion of it was needed for operations. Family members waived all of their surface rights when they sold their adjacent property over the years.
Several people have expressed an interest in buying my tract of land, but want me to give up 100% of my surface rights. I am willing to waive the surface rights to approximately 30 acres.
I feel that waiving any more than this would diminish the value of my minerals.
Keep in mind that not waiving the surface rights will diminish the value of the surface for many buyers. Minerals are dominant in Texas and the oil company will be able to drill, install pipelines and roads for development of the minerals and does not have a statutory obligation to compensate the surface owner for this.
Reserving the minerals is quite clear and dry cut. When you say youd waive the surface rights to apprixmatley 30 acres, what exactly do you mean? If theres no drilling in the area, are you trying to look into the future where they might put well sites and retain those 1 time payments even though you have no idea where they might drill the wells from IF the land is ever leased and drilled? If so, surely you realize this will scare away 99.9% of the buyers, why would any buyer want to buy 110 acres only to have acess to 80 acres of it? And if they have livestock on the land, they have no protection IF a well is ever spud on the property. If a company wants to drill a well, they will do so, you creating this far fetched plan to retain future drilling sites has absolutely no bearing on your minerals being drilled.
I am not a Landman. My wife and I own minerals ONLY for land in Texas. We also live a thousand miles away. Our minerals are presently under lease, but drilling has not begun yet. I have always felt that owning real estate is a poor financial investment, unless the land is being productive to earn money, with having a positive cashflow. The only exception to this purchasing your own residence. Right now, our minerals are not yet producing. The really cool part of owning minerals, and NOT the surface is simple. It is the land owner that pays the property tax.
On a practical basis, no oil company needs 80 acres for operations on 110 acres. Think more of 5-7 acres for a well. RRC sets minimum acres for a well. If there are 40 acres per shallow well, then maybe 3 locations. Horizontal wells require more acres. Some oil companies will trample the surface owner, such as by not paying full compensation and installing roads diagonally across the land. Question seems to be how to protect surface purchaser and mineral owner. Perhaps you can designate specific acreage at a corner(s) of the land for well operations and require roads and electric lines to follow the perimeters and that any oil and gas lease will contain a provision about compensation to the surface owner. What about water which is a very big issue these days? Would you consider specifying that no subsurface water will be used for well operations or at least require both agreement by surface owner and compensation to the surface owner? The same as any surface use agreement that you would execute for a lease. This would also allow the surface owner to use for solar. The question is how to maximize the sales value of the surface and how to protect the minerals. You cannot expect the same price for acreage with possible future destruction as for acreage which has surface protections. Will land only be used for grazing? For crop fields? For a house? I have seen acreage plus house for sale with an oil lease road crossing through the middle of the land so there is no way to fence off for privacy. Pass on that.
Get an attorney to “separate the mineral rights from the surface”. Then put the land up for sale plain and simple. I have done this multiple times in Texas. When you sell land once someone buys it, its theirs. The buyer or future owners can’t tell you what to do with your mineral rights. That’s all you can control. And they can’t do anything about it!
The original poster, said he/she wanted to sell 110 surface acres, but keep rights to 30 surface acres for future oil and gas wells, 110-30= 80 acres, those numbers were not based on drilling pad acreage which is why I said why would someone pay for 110 acres while only controlling 80 of the acres that they cant use? If you want to sell 80 acres and keep 30 acres and wherever the crystal ball says wells will be drilled 5 years from now or never and you carve out tracts of land within the 110 acres for future pad sites, thats fine. I would never in my life buy 110 surface acres with the demands being mentioned on 30 of the 110 acres as my sole purpose is to run cattle or horses on the land for tax purposes and maybe have 1 good year every 5 years or so when wheat, pecan and cattle prices align. The last thing Id ever want is the previous surface owner telling me what to do with the land I bought.
Bob, not sure why you are reposting my post as it clutters up the chain. I always just hit reply and I know you do not own the property at issue. I was throwing out ideas to the original poster about his problem in selling the surface and possible solutions or compromises he can make. That said, he stated that he was only willing to do a surface waiver on 30 acres. As I see it, that means he will not waive surface rights on 80 acres and so will reserve them for oil and gas use. And that means that 80 acres are a problem for the buyer.
I was unaware of that. My wife inherited the rights 52 years ago, and never paid property taxes. So, they will tax us once we hit gas. That is okay, we just won’t get as much “Manna from Heaven” that we thought. I am curious as to how much the taxes are. Our lease is for 20% royalty, so how much would we net post production? 19%…18%…? Either way, it will be nice to get the monthly payment for probably the rest of our lives.
Follow up comment about the royalties and taxes…We are very uneducated on this industry, except from what we learned from J.R. Ewing 40 years ago. (I loved that show “Dallas”) Nonetheless, we live a thousand miles away and haven’t been to Texas in about 25 years.
Jimintennessee, I paid about $3k property tax on 7 wells that paid out about $42k (gross) last year. That works out to about 7% of my gross. It was about 7.5% of my net. Those same wells were about 6% in 2023 and 2% in 2022. It all depends on what county and what your future production is assessed for. The percentage of tax to income will change drastically if your well is shut in or reworked to increase production. Or oil/gas prices could swing wildly. There’s no way to say what percentage of your income is going to go to property taxes.
Every single one of my posts are tagged by Martha needing approval for some reason, Im guessing its bc I go against the grain on selling minerals, but who knows? So by the time my posts hit 24 hours later and numerous other posts are posted, its a day after and its hard to follow. Im getting up their in age 78 years old but still feel like a young whippersnapper. Sorry TD, I always enjoy reading your posts
I really don’t understand the industry. All I can say for certain is that we own minerals ONLY to 47.5 acres in Freestone County, just north of the Leon County line. It is in the T.R. Thurman survey, A-614. We have leased them to a landman about May of '23. It is a 3 year lease with an option to renew for 2 more. We were paid $750.00 per acre and 20% royalty.that check for $35,625 was most helpful, as I was in need of a new vehicle. If they renew 15 months from now, we would get another $35,625. Of course I would prefer that they drill soon. Also, we have been approached from other speculators offering to purchase our rights, but we don’t plan on selling. We have already turned down an offer of $142,000. My wife and I are almost retirement age, and our thoughts are to hang on to the rights. If we hit, I am thinking it would be a very nice supplemental income for us. Furthermore, I am thinking that we could create a family trust, so that it would make a smooth transition, and subsequently a nice income for our two sons after our days on this Earth are done. Any financial planning regarding this would be most appreciated.
Bob, 78 is NOT old. It is an age where you have wisdom gained from a lifetime of experience. And it important to have different perspectives presented on this forum. People hold or sell based on a variety of situations - including financial considerations and just the thrill of the deal. What I like about this forum is that it provides useful information, suggestions and ideas for a lot of people. Keep posting!
MK