Oil and gas law refers to the body of laws and regulations that govern the exploration, extraction and production of oil and natural gas resources. Oil and gas law includes laws related to ownership of mineral rights, leasing of land for drilling, environmental and land use regulations along with the transportation and sale of oil and gas. Please contact our oil and gas attorney with any questions regarding oil and gas law!
What is the Importance of Oil & Gas Law?
Oil and gas law is important because it ensures oil and gas resources are developed and used in a safe, responsible, and sustainable matter, while protecting the rights of all parties, including landowners, mineral rights holders and the general public. For example, the passing of mineral rights is an important aspect of oil and gas law because it determines who has the legal right to explore and extract oil and gas from a particular piece of land. A consistent body of oil and gas law helps prevent disputes between surface owners and mineral rights holders over oil and gas development and land use of land.
Mineral Right vs. Surface Right Ownership
Surface rights and mineral rights refer to different types of property rights that pertain to land. Surface rights refer to the rights to use and occupy the surface of a piece of land. Owners of surface rights have the right to build structures, farm, graze livestock, and engage in other activities that are done on the surface of the land. Mineral rights ownership refers to the ownership of the minerals that are located beneath the surface of a piece of land.
Mineral rights refer to the rights to explore for, drill for, and extract resources such as oil, gas, coal, and other minerals from beneath the surface of the land. It’s often the case where the surface owner of a piece of land often does not own the mineral rights of the land. Unlike surface ownership where it’s common to have one owner, mineral rights after commonly owned by multiple people and entities, with varying ownership amounts.
How can I find out if I own a mineral right?
Considering annual property taxes and everyday life, people typically know if they own a surface right interest in a piece of land. Unlike surface right ownership, mineral right ownership is often more difficult to clarify and understand. There are several ways to find out if you own a mineral interest:
- Specific county’s tax mineral right ownership: similar to a surface right ownership, you’d be notified of owning a mineral interest when annual property taxes are issued.
- Review your property deeds: one of the simplest methods for finding out if you own a mineral interest is to review the deeds to your property. If the property includes mineral rights, it may be specified in the deed. Though reviewing a property deed does not ensure information regarding mineral ownership, it’s a great starting point.
- Consult an oil and gas brokerage company or oil and gas attorney: An oil and gas brokerage company or attorney can conduct a mineral title search on your property which can provide a detailed report outlining the ownership of the mineral rights and any other information related to the property, including lease and production status.
- Check with family members: If mineral rights were passed down through your family, check with other family members to see if they know who owns mineral rights or if they have information regarding the location of documents that would indicate mineral right ownership. One reason mineral right interest may not be properly updated is because people often fail to probate the mineral rights of a decedent, meaning they do not legally transfer ownership of the mineral rights from the decedent to the rightful beneficiaries. If a decedent was receiving royalty payments at the time of death, it’s possible the oil and gas operator would stop royalty payments until proper documentation was provided showing the updated ownership of the decedent’s original mineral interest. If the royalties are not being paid, the Personal Representative may need to hire a probate attorney to properly convey the decedent’s mineral interest to the respective beneficiaries. It’s important to note that mineral rights ownership and royalties can be complex, especially if the mineral ownership involves a decedent. It may be best to consult with a Colorado probate attorney who has experience addressing mineral right ownership to ensure the process is handled correctly.
Maximizing Your Mineral Rights: The Value of Updated Records
In the situation where the mineral interest is not producing and there’s not a concern about receiving producing royalties, it’s still valuable to make sure the necessary conveyance paperwork is completed to ensure the mineral ownership of the decedent is properly conveyed to the rightful beneficiaries. Having updated mineral right ownership records can be valuable for several reasons: • Protection of rights: Up-to-date records in the courthouse serve as proof of ownership and can help protect the owner’s rights in case of disputes or challenges to ownership.
- Facilitating transactions: Clear title to mineral rights holders can help companies and individuals interested in exploring for oil & gas to quickly and easily identify mineral owners for leasing purposes. In addition, clear mineral title ownership makes it easier for buyers and sellers to complete transactions involving mineral rights.
- Proper compensation: Updated mineral ownership records help ensure that mineral right owners receive proper compensation for the extraction of minerals from their land. This can help to prevent disputes over mineral right ownership.
- Compliance: In some cases, it’s mandatory to have accurate and up-to-date mineral rights records in the courthouse in order to comply with state and federal regulations. This is particularly important in the oil and gas industry where environmental and land use regulations are strict.
What’s Next After Discovering You Own Mineral Rights?
The oil and gas mineral leasing process typically the identification of potential leases and lease acquisition. Companies and individuals who are interested in exploring for and developing oil and gas resources may conduct research, geological surveys, to identify areas that are likely to contain valuable resources. Once an area of interest is identified, the company or individual will typically submit a lease offer to the owner of the mineral rights. This may involve negotiating the terms of the lease, such as the length of the lease term, the royalty rate, and the development and production obligations. A lease can provide a source of income for the lessor, in the form of royalties or lease bonuses. A well-negotiated lease can also provide protection for both the lessee and lessor in the event of disputes or other issues. The going rate for a mineral lease bonus can vary depending on a number of factors, including the location of the property, the type and quantity of resources present, and market conditions.
Important Terms to Know in an Oil and Gas Lease:
An oil and gas lease agreement because they define the rights and obligations of both the lessor (mineral right owner) and the lessee (oil and gas company) regarding the exploration, development and production of oil and gas resources on the property. There are several important terms that are typically included in an oil and gas lease. These include: • Term Length: Term length is an important term in an oil and gas lease because it determines the length of time that the lessee (the company or individual who is leasing the land) has the right to explore and extract resources from the property. A longer term length provides the lessee with more time to recoup their investment, while a shorter term length is often beneficial to the mineral right holder. Assuming there is no production on the land, a shorter lease term leads to the increased possibility of the mineral right owner being re-leased, leading to an additional lease bonus for the mineral right owner. Term length can be used as a bargaining tool for the mineral right owner to negotiate for higher royalties or other favorable terms.
- Royalty Rate: The royalty rate in an oil and gas lease determines the percentage of revenue the mineral right owner will receive from the minerals extracted from the property. A higher royalty rate means the mineral right owners will receive a larger share of the revenue, which can be a substantial source of income. Typical royalty rates for an oil and gas lease range from 12.50% to 20.00%, depending on a multitude of factors, including the location of the land.
- Liability and indemnification: Liability and indemnification terms are important in an oil and gas lease because they define the responsibilities and potential risks for both the lessee (the company or individual who is leasing the land) and the lessor (the might right owner) in case of any accidents or incidents that may occur during the exploration and extraction of oil and gas resources. These terms can include provisions for who is responsible for damages to the property caused by the lessee’s activities. By including these terms, both the lessee and the lessor are able to protect themselves from any potential financial loss or legal liability that may arise from the exploration and extraction of oil and gas resources.
- Force majeure: This language is important in an oil and gas lease because it defines the circumstances under which either party (the lessee or the lessor) may be excused from fulfilling their obligations under the lease due to events beyond their control. These events, commonly referred to as “force majeure” events, can include natural disasters, war, strikes, or “other acts of God.” By including this language in the lease, both parties are protected from any potential financial loss or liability that may arise from their inability to fulfill their obligations due to such unforeseen events.
- Dispute resolution: Dispute resolution language is important in an oil and gas lease because it provides a mechanism for resolving any disputes that may arise between the lessee and lessor during the term of the lease. This can include disputes over the interpretation of the lease terms, disputes over royalties or other financial issues, or disputes over the lessee’s compliance with their development and production obligations. By including dispute resolution provisions in the lease, both parties can avoid costly and time-consuming legal battles, and instead resolve disputes through more efficient and cost-effective means such as mediation or arbitration. Furthermore, dispute resolution language can also provide a clear process for both parties to follow, which can help to avoid misunderstandings and conflicts.
If you are dealing with determining or locating mineral right ownership, navigating the oil and gas leasing process, or are a personal representative who needs to convey a mineral interest, it is important to consider hiring an attorney who is familiar with the intersection of mineral rights and probate law to ensure that your legal needs are fully addressed. The Law Office of Josh Krieg has extensive knowledge and experience in dealing with complex issues that arise at the intersection of mineral right ownership and probate law. Our probate lawyer in Fort Collins, Colorado is pleased to offer full remote services to clients throughout Colorado, Wyoming and North Dakota. Whether you are seeking assistance with estate planning, mineral right ownership, or probate, our team is here to help. Please contact us today to schedule a consultation and experience our professional and personalized approach to the law.