With the emergence of fracking for natural gas in this state, SECU has stopped financing and refinancing homes without mineral rights. SECU considers it too risky to finance properties where underground rights can be developed into drilling operations, with the occupant having no say over the matter.
Much of the former timberland lies in the eastern part of the state, where there is no trace of shale gas. But with the emergence of fracking, mineral rights have become a poison pill indifferent to geography.
Today I was hoping to talk with you a little bit about oil and gas production in Texas and specifically the surface damages and the use of your surface as a landowner in Texas. In Texas, oil and gas, and surface are two different interests potentially. Most of us are familiar with this idea that two different people may own the surface rights and not own the mineral rights or the oil and the gas.
This is a very tricky subject and one that you should speak with a lawyer about. Before buying a property with no mineral rights, you ought to be discussing these issues with your lawyer. You should ask your attorney about the difficulties you might have five or ten years down the road when this property might get developed for oil or gas.
The attorneys of Wadler, Perches, Hundl & Kerlick have many years of experience representing the rights of surface as well as mineral owners in issues related to oil and gas law. Call or text 800-929-1725 for an appointment at our offices in Wharton County, Fort Bend County, and Matagorda County. Appointments can be in-person, online, or by phone.
But finding the perfect property is just the beginning of the land buying process. In order to know how to buy land in Texas, there are a number of state-specific trends and regulations to understand.
"Typically in Texas, mineral rights have been severed from the property. I currently have 200+ listings, and not one has mineral rights," says Karen Stout, land agent at Homeland Properties.
The only way to know for sure if a property has mineral rights is to hire a professional landman to conduct an intensive mineral title search, which can be costly. You can find a landman by contacting the American Association of Professional Landmen.
Buying land anywhere - including Texas - involves a lot of steps. But the end result, owning property where you have the freedom to use the land to suit your needs, is worth every minute of the buying process.
By default all mineral rights are transferred from the seller to the buyer with a TREC contract unless specifically reserved in the contract. In Texas, the mineral estate can be forever severed from the surface estate but remains the dominant estate. This means that the owners of the minerals have the right to use the surface estate to access their estate unless surface waivers have been signed. There is a lot to this subject and if this is something you wish to negotiate on during a deal make sure you engage an attorney who specializes in mineral rights.
Mineral rights when buying land is a subject that concerns a lot of people. Whilst it is good to be aware of what rights you do and don't have, in most cases it is unfounded and there is nothing to worry about.
Mineral rights when buying land can be described as the unseen value associated with a tract of land. Historically, land was transferred among owners with the royalty rights co-mingled with the surface rights. As oil and gas production began in the U.S., these rights started to be viewed independently.
Separate ownership of mineral rights and surface rights can sometimes cause confusion. With respect to oil and gas production, the owner of the surface rights has limited input as to whether oil or gas is produced from underneath his property. If production is established, a portion of the value is paid via a royalty fraction (i.e. percentage) to the mineral rights owner.
Most land purchases give you the surface mineral rights to the property. This means you can dig a well, you can dig foundations for your house, you can till your land for agriculture. This is extremely common to just be buying the surface rights in large parts of Nevada, Texas, Oklahoma
If you do not own the mineral rights when buying land, it means you cannot start a mining operation! You cannot lease or sell your land to an oil or gas company for exploration and extraction purposes.
The local county office should have all the records. Examine them carefully and look for language anywhere in surface deeds that state the seller is reserving all or part of the mineral rights under the land being sold. The mineral estate and the surface estate can actually be split off from one another, and commonly are.
Royalty deeds may also be found, which are not the same as mineral deeds as they do not actually transfer the mineral rights, but only a right to receive royalty from the minerals if and when they are actually produced. The grantor of the royalty deed would still retain actual ownership of the minerals, so the title to the minerals would not transfer to the grantee on the royalty deed.
It is unlikely that all the minerals under your land have always been owned by the same party, or that one party owns all of them now, so you will need to find ALL of the instances where the minerals have changed hands over the years and keep track of the divisions from the beginning in order to determine who owns what currently.
As with other assets, royalty rights come with a tax liability. These tax burdens vary depending on whether the minerals are being produced or not. Minerals can be taxed both at the state and county level, in addition to your federal taxes.
Remember obtaining mineral rights when buying land will make the land considerably more expensive. If you are not interested in mining your land (99% of people are not), keep it simple and stick to the criteria you actually want.
Keep it simple and do not get distracted by shiny objects that will send you down a rabbit hole and delay you getting your dreams. You might be able to buy your dream property for $3K-$10K. You will not be able to buy mineral rights for this amount. The price would sky rocket.
Yes it is important to understand mineral rights when buying land, what you are buying and all the risks involved. However, sometimes the mineral rights issue costs people months and months of time as they toss and turn at night wondering if a big multi national will come knocking on their tent one day in an attempt to dig up their 20 acre parcel.
A moment should be taken at this point, however, to consider the perspective of a buyer who wishes to purchase land for drilling and mining purposes or purposes that are potentially compatible with drilling and mining purposes, such as farming and ranching uses, and therefore desires to own all of the oil, gas, and mineral rights. You may be unaware, but the latest production figures from November 2014 provided by the Florida Department of Environmental Protection show that oil wells in Florida produced 182,665 barrels of oil, and natural gas wells in Florida produced 1,620,588 cubic feet of natural gas, all in one month alone! Further, in 2011 (the latest figures available), Florida reportedly produced 18,460,000 metric tons of phosphate! Thus, if a Realtor is representing a buyer who desires to own oil, gas, and mineral rights, because they are in the business of mining or drilling or their business purposes are compatible with mining or drilling, the Realtor ignores the ownership of oil, gas, and mineral rights at potentially great financial peril to himself or herself!
Further, we recommend that a Realtor who is representing a buyer who is a farmer or rancher recommend to the farmer or rancher that the contract contains the clauses referenced above even if initially such a buyer plans to only farm or ranch. Oil and gas production in particular can be compatible with ranching and farming, and the protection of these clauses can always be waived. Otherwise, if you are their Realtor, you must be concerned about the following scenario. A farmer or rancher buys land pursuant to a contract that requires the farmer or rancher to take the land subject to oil, gas, and mineral rights. Then such oil, gas, and mineral rights and the right of entry are found to be owned by a third party. Even worse, valuable oil, gas, and minerals are actually found to exist. That farmer, every time she walks out onto her field, or that rancher, every time he rides onto his pasture, will be extremely upset to see those wells pumping out all of that oil or gas, worth thousands of dollars every day, day after day, for which he or she is receiving no consideration. (In addition, oil, gas, and mining company employees, vehicles, and equipment will be present frequently, if not daily, disturbing the farmer, the rancher, livestock, and wildlife.) Our concern is that the rancher or farmer might start thinking about why his or her Realtor did not protect their client and ensure that the rancher and farmer received some of those profits as royalties, especially considering the inevitable disturbances they will endure.
As you recall, both the FR/BAR real estate contracts and the CRSP-13 real estate contract for residential sales and purchases state that mineral rights ownership by a third party without the right of entry is not a title defect, and, therefore, the buyer may not object to the rights. Thus, when faced with the problem of mineral rights with a right of entry, the mineral rights search referenced above can be ordered back to the root of title of the mineral rights to try to eliminate the right of entry in this manner, if the oil, gas, and minerals are not being taxed, explored for, or mined.
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