real estate

Uncovering mineral rights

Steve McLindenq_v2.gifDear Steve,
I went to a meeting about natural-gas rights and the gas people said I wasn't on the eligibility list. One neighbor thought the builder owned the mineral rights in our subdivision. But there's nothing on my deed about this. How do I check?
-- Virginia

Do mortgage companies have any rights to the money you get for a mineral or natural-gas lease? 
-- Stephanie

a_v2.gifDear Virginia and Stephanie,
Your letters are among scads I've received since I first wrote about mineral rights in March.

First off, Stephanie, mortgage companies typically don't own these rights, although some charge subordination fees if you enter into a mineral rights lease. In newer lease agreements, many gas companies agree to pay all the subordination fees that homeowners would have otherwise incurred. Request this from the gas company if it's not part of the original offer.

As for you, Virginia, it's time to check your title policy. While most of these gas companies do a reasonably thorough job of checking, their determinations are sometimes wrong. If you do not own the rights, your title might note something like "Mineral rights do not convey" under "Exceptions."

Even if that exception is absent, that's still not a 100-percent guarantee you own the rights. I would first check with other neighbors to see if they also don't own mineral rights. My guess is you live in a fairly new subdivision, because most builders didn't have the foresight to claim mineral rights until the early part of this decade.

Minus a title exception, the only sure way homeowners know if they own mineral rights is to retain the services of an oil-and-gas attorney or "land man" who may have to research the property and (or) geological surveys all the way back to the 1800s. But this can be cost-prohibitive for homeowners who don't have substantial acreage. Land men say that current homeowners have those rights at least 95 percent of the time if there is no exception on the title.

Now that energy companies can extract gas and other natural resources from heretofore unreachable places, I strongly suggest that all home sellers secure mineral rights to their properties before putting them on the market, even if no gas or other valuable natural resources have been discovered locally. (Conversely, savvy homebuyers should ask for those rights as part of their offer.)

I mention this because another huge natural gas deposit similar to the lucrative 5,000-square-mile Barnett Shale in north Texas has been found beneath a large section of northwest Louisiana, with smaller branches into west Texas and parts of Arkansas.

Called the Haynesville Shale, this field has precipitated a mini land rush with gas companies quietly buying up drilling rights for several months before informing the public of the find. Smaller fields in Pennsylvania, Ohio, New York and West Virginia have also been found.

Payments are getting pretty substantial, too. In Texas and Louisiana, firms are forking out between $20,000 and $30,000 per acre with royalties of 25 percent or more, often calculated to the middle of the street in the front and to the rear as well if the backyard directly abuts another street.

Some homeowners have held out for top dollar and earned a few thousand extra for their efforts. There are no reports to my knowledge of holdouts being offered less than initial offers.

Good luck, homeowners, in these fields of (found-money) dreams!

advertisement

Show Bankrate's community sharing policy
          Connect with us
advertisement
MORTGAGE & REAL ESTATE NEWSLETTER

Timely market news and advice for consumers ready to buy, sell or invest in real estate. Delivered weekly.

Blog

Polyana da Costa

Borrowers get $2.5B from Citi

About $2.5 billion of Citi's $7 billion settlement will go to consumers  ... Read more

advertisement
Partner Center
advertisement

Connect with us