DUTIES OF MINERAL OWNERSHIPby Will Brackett
The National Association of Royalty Owners (NARO), the nation’s largest organization which represents owners of mineral rights, suggests that there are “ten duties” of mineral owners. We at MyMineralRights.com believe these “ten duties” are worth repeating here on our site and do suggest that all mineral owners consider joining NARO or another organization dedicated to standing up for and advancing their rights.
NARO developed the Ten Duties of Mineral Owners in order to emphasize that mineral rights are an asset that you need to manage and not merely just a source of “mailbox money” which requires no active participation on your part.
Before we get to NARO’s Ten Duties, the organization notes first that there are four major events in the ownership of mineral rights.
4 Major Events for Mineral Owners:
- Ownership – Obtaining ownership of mineral rights via inheritance, deed, etc.
- Leasing – Signing an oil and gas lease to have your minerals (hopefully) developed.
- Division Order – Document that verifies your revenue interest to ensure you are paid.
- Royalty Check – Payment for your share of the production.
NARO’s 10 Duties of Mineral Owners:
- Know what you own
- Know what information you need and where to get it
- Know what is going on in your area of interest
- Know what the future impact the fine print in the oil and gas lease and/or division order will have on your royalty payment
- Know who has it (your lease, your well, your production)
- Know what questions to ask and to whom to ask them
- Know your limits
- Keep copies of the originals of everything and organize it
- Know that you must remain vigilant and do something
The Ten Duties Described
- Know what you own. Many people who own minerals are not aware of what they own, particularly if the mineral interest was inherited. See if family members have information on the mineral interest or perhaps go to the county courthouse to obtain a copy of the deed so that you know exactly what you own.
- Know what information you need and where to get it. If you are not sure about things such as how many wells are on your lease or how much oil and gas they produce, there are sources where you can find this information. Oil and gas producers are required to report their production to state regulatory agencies, so the website for the oil and gas regulator in the state where your lease is located is a good place to start. If the information you seek is not available from government regulatory authorities, there are also private sector informational services such as DrillingInfo, although these are likely to be available via paid subscription only.
- Know what is going on in your area of interest. You need to know what is going on in the area where you own mineral rights, which can be difficult if your minerals have been severed from the surface. If your minerals are unleased, you need to be aware of leasing activity and the companies involved. If your acreage has been leased, you need to know what operations (such as drilling) are occurring and the development plans of your lessee (the oil and gas company holding your lease). Monitor local media and talk to neighbors or other landowners in the area to be informed. You can also contact NARO, which tries to keep track of oil and gas leasing activity in the U.S.
- Know what the future impact the fine print in the oil and gas lease and/or division order will have on your royalty payments. You need to know what is in your oil and gas lease, because you will have to live with the terms of the lease until it expires. Many mineral owners sign what they believe to be a favorable lease only to find out later – after it is too late – that the lease contains language or clauses that are to their detriment. Therefore, we highly recommend you retain the services of an experienced oil and gas attorney to help you review and negotiate a proposed lease and ensure that there is no fine print in there that you will come to regret later. When you receive a division order, you need to carefully review it – the legal description of your property, your net revenue interest, and whether the terms match those of your lease – before you sign and return it.
- Know who has your lease. If your minerals are leased, then you need to know who is the current holder of your lease (the lessee). Leases can change hands with oil and gas companies selling properties to one another or buying each other out. You need to be aware of who holds your lease and have contact information for that company should you need to get in touch with them.
- Know what questions to ask and to whom to ask them. You need to be aware of where to turn if questions or problems regarding your lease should arise. For example, questions regarding royalty payments should be directed to the oil and gas company holding your lease, while damage being done to your land may need the attention of state regulatory authorities.
- Know your limits. If you have exhausted the resources available to you or feel you are in over your head, consider hiring a professional such as an attorney, accountant, or petroleum engineer to assist you with whatever need you may have.
- Keep copies of the originals of everything and organize it. If possible you need to keep copies of important documents such as your oil and gas lease, division orders, and the deed to the property. Keep this information organized and share it with your family members, especially your intended heirs if you plan to pass your minerals on to them.
- Know that you must remain vigilant and do something. Stay on top of your lease and the income you receive from it. It is your responsibility to monitor things and catch and report errors if you find them. For example, if you believe that your royalty payments are not correct, it is up to you to contact your lessee in a timely manner.
- Plan. Manage your mineral asset with the future in mind. If you are passing your minerals on to your heirs, don’t keep them in the dark about your mineral interest and please don’t leave them with a mess they will have to clean up after you are gone.