I’m trying to buy a farm/ranch in Washington Co. Texas and minerals are negotiable. What’s the going rate for oil and gas rights? It’s northeast Washington County, near Washington.
Welcome to the Mineral Rights Forum!
I always recommend to my clients that they get all, or at least part, of the mineral rights when they purchase property. Without mineral rights included, you lose a great deal of control over the use of the surface since, in Texas, the mineral estate is the dominant estate and can make all reasonable uses of the surface in pursuit of oil and gas production.
While on the one hand, you sometimes pay more for property that includes the mineral rights, (although that’s not always the case) on the other hand, there is no set rule of thumb or going rate for mineral rights. It depends on how active the oil and gas exploration is in the area of the property and a number of other factors. While there is a lot of oil and gas (primarily gas) activity in Washington County, the Railroad Commission maps show none at all near the city of Washington. Most of it is in the western part of the county.
You might check with a local broker to see if they are aware of any differential that’s being paid in the area of your property for land with mineral rights. If that doesn’t help, you might want to wait and see what the seller wants for the mineral rights included. In addition, keep in mind that if mineral rights are not being currently being produced, it’s always possible they will never be produced, and so the amount of any premium for including mineral rights in the purchase is usually highly speculative. In some cases, no premium should be paid. In the case of land around the city of Washington, my guess is that there should be no premium paid for the minerals being included.
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The first thing I would focus on is making sure I got full surface control of the land, regardless whether the sale involves any of the mineral interest. Having surface control means no one would be able to make a drill site, or use any of the surface of your property for oil and gas production, pipelines, etc. without your consent. Without that control there would be no guarantee that perfect house site, or great view will stay the same as when you bought it. With the amount of horizontal drilling and pooling that takes place today a mineral owner doesn’t need surface control to make money off their minerals but the surface owner of the property definitely needs to have surface control in order to protect his interest from the damage that can be done to it in conjunction with mineral development.
If the land owner you are negotiating with owns the full mineral interest, you could make receiving a waiver of their surface rights a condition of the sale regardless if you bought any of their mineral interest. If they don’t own all of the mineral interest in the property, or at least have full surface control of it themselves, then the situation could be more complex. If they don’t own or have surface control to a majority of the mineral interest, or they aren’t willing to waive their surface rights as part of the sale, you’ll need to decide if you are willing to buy on that basis, or how large a discount in price it would take for you to be interested.
Regarding your question about the going rate for mineral rights, in Washington County, like everywhere else, the prices being paid for mineral interest are definitely down from the levels they had gotten to a few years ago, but can still be a significant part of the overall value of a piece of land. There hasn’t been any recent drilling activity in the Washington area but I think you’ll find leasing and mineral sales are still happening on that side of the county.
If the property you are considering is listed for sale, or the owner has quoted you a price, ask if that includes mineral interest and surface control. If you end up negotiating a sale that includes part of the mineral interest, as is often the case, have the deed prepared by an attorney who is familiar with oil and gas law because incorrect wording related fractional mineral interests can definitely cause problems.
Slight correction-mineral rights are dominant over surface rights in Texas. So if you do not have control over the mineral rights, then the surface owner cannot control where drilling would be and a company can come in and drill (within reason). If you control both, then you do have a say-so on locations because you control the minerals.
Thank you, Dusty. That’s great information and advice. This owner does have 100% of mineral ownership. I have not asked about surface control. Is there at least a range of values one might expect to negotiate for mineral rights in this area, e.g., $500-1,000 acre?
Thanks again for the very helpful information.
Doogle
Thank you, Aimee and MBarnes. Your comments are very helpful.
Martha, maybe this isn’t what you are saying, but if you feel in Texas an owner of surface only but who also has a full waiver of surface rights from the owner of the mineral interest won’t have full control over whether a drill site or any other mineral related use of the surface of that property can occur, I think you need to recheck that. The grey areas are when a surface owner has surface waivers to only part of the mineral interest.
If the mineral owner (who has dominant rights) gives a waiver to the surface owner then there may be control as long as that mineral owner has the title. They could sell to someone else who would revoke the waiver. I do agree with your second part as to partial waivers.
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