Author: Valor

By working with a mineral management company, you can be confident that your assets are protected and your revenue is maximized with limited involvement.

If you own the mineral rights to a property, you may have a unique opportunity to generate new revenue. However, knowing how to capitalize on these opportunities isn’t always common knowledge for people not well-versed in the oil and gas industry.

Whether you’ve inherited mineral rights or an oil lease from a family member or are looking to take advantage of the resources on land you already own, it’s important that you go about it in the right way. Otherwise, you may end up finding more trouble than revenue.

Can you answer these questions?

When speaking with prospective clients who are unsure if they need a mineral management partner, we ask them if they know the answers to these questions:

1. 1. Do you know what is getting paid on?
2. 2. Do you know which wells have stopped producing to open acreage?
3. 3. Is everything in pay status?
4. 4. Can you easily match revenue to 1099s?
5. 5. Do you have any funds in suspense?
6. 6. How are you tracking dormant mineral clauses?
7. 7. Do you know how much revenue a specific property has produced and would you be able to provide documentation in a timely manner?

If these questions yield uncertainty and more questions, then outsourcing your mineral management could be a great solution for you. Managing minerals can be very difficult, and knowing how to manage these rights is imperative for long-term success.

Knowing How to Manage Your Rights Is Crucial

Because mineral rights ownership isn’t something the average person has experience in, it’s easy for those in the know to take advantage of those less knowledgeable. If you try to sell mineral rights on your own, for example, you could end up with offers well below the market share. You likely don’t know what your rights are worth, and you probably don’t realize just how many potential buyers are out there. So, you could end up with only a handful of offers and assume the highest bid among them is the best you’ll get.

Things don’t necessarily look any easier if you’re keeping your rights. Mineral management comes with a different set of complications you might experience if you don’t know what to do. You could end up getting taken advantage of during lease contract negotiations, for instance, or you could end up paying fees that rightfully should be covered by your exploration and production (E&P) company.

Day-to-day management comes with its own set of considerations (which can be overwhelming even for those who do have mineral management experience). You have to make sure all your information is accurate, up-to-date, and organized so you can monitor payments, calculate your own division order interest, and cross reference volumes and pricing. This is the only way you can truly be certain you aren’t missing payments or that your mineral and oil royalties aren’t being undervalued.

How to Get Started With Mineral Resource Management

If all of this sounds like more than you can handle, don’t worry. You don’t need to be an expert in mineral and oil leases to properly manage them. However, you do need to know where to begin. Here are two initial steps to get you started:

Make sure you have all your documents in place.

Improper documentation is one of the biggest mistakes you can make when trying to manage deeds, title, and oil leases. When it comes to mineral rights management, there’s a whole host of documents you need to keep track of. Without proper care, it can be easy to fill one out incorrectly or let one slip through the cracks.

The first thing you need to do is gather up all your documents and make sure they’re in order. This includes source documents, property titles, division orders, existing leases, checks, tax records, and inventory sheets as well as any other documentation with relevant information. Organizing all these documents can be a big job, but doing the work ahead of time will make it much easier to manage your rights going forward.

Enlist the help of experts.

Whether you’re dealing with a single lease or a large portfolio, mineral resource management can be a full-time job. By working with a mineral management company, you can be confident that your assets are protected and your revenue is maximized without having to deal with everything yourself.

Contact Valor Today

Valor provides mineral management services developed and run by industry professionals who have decades of experience. If you’ve recently come into possession of mineral rights or oil leases, we can help you make sure you get everything out of your new resources. Contact us today to see what we can do for you.

The information provided by Valor in this blog is for general informational purposes only, not to provide specific recommendations or legal or tax-related advice. The blog/website should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.

When it comes to mineral estate planning, many mineral rights owners don’t realize how easy it is to lose these rights. Assets do not always remain static once the initial transfer has occurred. In fact, unless their mineral rights are in states such as Texas, Oklahoma, or New Mexico, inheritors will likely need to take action to keep their legal rights to mineral assets valid.

How Can You Lose Your Mineral Rights?

The tricky part is the laws around mineral rights vary from state to state. Your rights will be different depending on where your mineral rights are located, as will the timeline by which your rights might revert to the surface owner. Many rights are lost when owners lose track of their filing dates or fail to update or refile an affidavit to maintain them.

Take North Dakota, for example. In order to remain the owner of severed mineral rights in this state, you need to file an affidavit every 10 years. Otherwise, your rights revert back to the surface owner. In the 1999 case of Spring Creek Ranch vs. Svenberg, Spring Creek sought the addresses of mineral rights owners. All they found was a deed from 1950 without a street address, but this was sufficient for “reasonable inquiry,” and the mineral rights reverted to them. As long as effort is made to discover the owners of rights and the rights remain dormant, then ownership can be transferred.

Another way you can lose your mineral rights is by failing to pay state ad valorem property taxes on them. Just like any other legal asset, mineral rights must be properly paid to the county tax office. If you don’t pay taxes on your mineral rights, you risk losing them.

Some mineral rights have been lost through poor management. Oversight of a filing or expiration date can cause havoc for inheritors and their assets. Not being proactive is also a risk — owning property in a popular area that doesn’t get leased due to poor management can be just as unfortunate for inheritors.

Still, some people just don’t care about their assets as much as others. This can be especially true of mineral rights. If an owner feels like their assets will never be tapped into or yield a product, then they might want to avoid paying taxes and the hassle of filing the stipulation process, and will voluntarily let their rights lapse.

What Happens If You Lose Your Mineral Rights?

It’s important to have some degree of urgency over keeping the rights to your mineral assets, but you don’t need to let fear or anxiety take hold. By arming yourself with knowledge, educating yourself, and preparing for the realities of mineral ownership, you can avoid many problems.

First, it’s crucial to know the different ways to lose or forego mineral rights. Check what the rules are in your state. Some states (like Louisiana) have “prescription assets” and others (like North Dakota) operate under a dormant mineral statute, which states that rights may be lost if owners are not utilizing their minerals.

Unfortunately, the process of getting rights back can be difficult, if not impossible. Once lost, mineral rights revert back to the surface owner, and you will not get them back unless you purchase them again or they are conveyed to you. That’s why ensuring your filing is up to date and that you know exactly what to do to maintain mineral rights in your state is so vital.

What Is the Best Way to Go About Protecting Your Mineral Rights?

Mineral rights don’t just stick around. Like any asset, they need maintenance. Luckily, if you have the right help and support, maintaining your rights isn’t too much of a chore.

1. Keep rights current by filing.

In most states, you will renew your mineral rights by filing an affidavit (similar to filing a deed). It should be drafted, executed (by signing and notarizing), and then filed in the applicable county. Valor can help you do this — we go find filing requirements, format pages according to the state’s individual rules, and so on so that you don’t have to.

2. Keep rights through a claim of dormancy.

If the surface in question is dormant, and you haven’t leased it to oil and gas companies, you can still maintain your rights to mineral assets if you file a statement of claim or dormant mineral deed to state that the surface is knowingly dormant. Timing for these filings will, again, vary from state to state.

3. Use technology to keep track of assets.

We use our proprietary platform mineral.tech® and its evolving built-in features to protect mineral rights from expiring. After you log rights onto the platform, it’ll alert both our team and you as the rights owner when they’re nearing their asset expiration date. This allows us to effectively manage, plan, file, and execute accordingly.

4. Partner with a company that’s got your back.

Valor is an expert in this industry, and we can keep you up to date with any state-specific changes or actions you need to complete to keep your mineral rights. Part of our job is to prevent mineral rights from expiring and transferring back to the original landowners. So, with us on your team, you can relax knowing that we have safeguards in place to mitigate this.

At Valor, we know the value and importance of assets. We never want to see a prospective or existing client lose their mineral rights. We have a deep interest in setting up inheritors to avoid challenges. Not every mineral management company will add this value; many will not agree to manage non-producing assets. But we see this as part of caring for clients’ overall interests.

So many essential tools and items we use in our lives are made possible by oil and natural gas, whose story all starts in the ground beneath our feet.

To understand the life cycle of a barrel of oil, we first need to understand how it is found. 

The development process of oil is long and complex; oil and natural gas don’t “act” the way most people think. They’re not the same product from ground to gas pump or ground to crayon, as different oils have vastly different life cycles. To know what oil is used for and navigate the “end products” of plastics, fabrics, fuels, and the infrastructure surrounding them, we need to learn how oil is found, produced, and refined for use.

How is the oil first found?

The search for an oil deposit usually begins with identifying a geologic formation/reservoir that may hold oil and/or natural gas. In the old days, this could have been based on gut feelings, seeing a hill and thinking the subsurface may have a similar structure trapping oil, or other not-so-scientific methods. In the modern day, geologists have access to a lot of scientific information, including core samples, logs from previously drilled wells, and seismic data. They also can tap into research compiled by entities such as the USGS (U.S. Geological Survey) or state agencies that regulate oil and gas exploration/development.

Once a geologist has identified what they believe to be a potential reservoir, petroleum engineers are brought in to help analyze the likely scale and viability of those reservoirs. If it still looks like a winner, the next step is for the oil and gas exploration company (“E&P” company) to secure the rights to drill. This typically means sending a land manager (“landman”) to verify the ownership of the subsurface property and to negotiate a lease with the landowner(s) to create a drillable unit, or bidding on the rights for a federal lease for federally owned lands.

At this point in its life cycle, the oil belongs either to the federal government or individuals who own the subsurface rights (“mineral rights”). The lease will specify what percentage of the production proceeds go to the landowner. Its “value” at this stage is not yet fully known. Geologists and petroleum engineers can give estimates, but because of the massive amount of variables and unknowns — including the volatile nature of oil prices further down the line — the value will change countless times before oil is actually extracted and refined.

How is the oil produced?

The E&P company will prepare to drill once the leases are secured and the title is verified. This can be a long process, including selecting the drill site, permitting, preparing the drilling/pad site, and building the infrastructure (roads to and from the well site, pipelines, electricity, etc.) to safely and efficiently bring the product to market.

Once a well is drilled, more scientific tests, including core samples evaluation and well logs, are run to help determine if it will be viable to produce and estimate reserves. If it is approved for the next step, then the well is completed and (hopefully) produced. 

After the product is produced by the “upstream” E&P company and reaches the surface, crude oil’s current market value can be more reliably estimated and is sold to a “midstream” company. Royalty owners also receive a royalty check at this point of sale for their portion of the proceeds as specified in the lease. It is important to note that the E&P company bears the expenses of the entire process to this point — the royalty owners do not share in the costs. 

The midstream company then handles the transportation, storage, and marketing of the product to the “downstream” refineries or processors. 

What can be produced from this oil?

Once the oil comes downstream to a refinery or processing facility, it will be turned into usable products. 

Oil is refined into a myriad of products that are foundational for our everyday life, from gasoline to plastic. Crude oil varies drastically depending on where it came from and how it was formed. Some have high paraffin/wax content, which can be used for cosmetics or polishes. It can come in many different colors (green, yellow, black, etc.). It can be thick and viscous or light and runny. Each has its own best uses and can be refined to yield different end products. 

Now nearing the end of its life cycle, the barrel of oil has a more specific purpose and is on to an equally specific location based on its product type — to the consumer.

What do people use in their everyday lives that come from oil? 

There are too many individual products to name! Wherever you are right now, innumerable things around you will be made, at least in part, out of oil. But we can take a look at the main kinds of products that come from oil production.

Out of the 7.2 billion barrels of petroleum consumed in 2021, 44% was used as motor fuel and 20% as distillate fuel. The rest was turned into other petroleum products.

Fabrics and surfaces are one major example. Clothing fibers like nylon and polyester. Road surfaces like tar and asphalt. Tent fabric. Diaper material. Solar panels. Coverings and coatings and shells and packages. Shoes and tights. Not to mention the dyes used to color and pattern those fabrics. 

Even charging stations for electric cars are fueled by power that requires oil and natural gas. We also have oil to thank for cosmetics and other everyday products like deodorant, lipstick, and toothpaste. 

One of the most important daily uses of oil is medical use. From the artificial limb that helps someone to live a full life after an accident to contact lenses, dentures, pacemakers, and MRI machines, oil is refined and manufactured into these life-changing products.

Oil and natural gas are an integral part of our daily living, beyond the gasoline in our vehicles or the natural gas that heats homes and other buildings. So many essential tools and items making up the details of our lives are made possible by oil and natural gas.

When it comes to mineral management, you might one day find your funds in suspense. What does this mean? Oil and gas companies are responsible for regularly distributing royalty payments to holders of mineral and royalty deeds. These operators don’t want to make a mistake or pay the wrong people, so they may put funds in a suspense account and hold payment if something doesn’t line up.

The good news is that there are simple explanations why, and there’s almost always something you can do about it. Whether you’re dealing with money currently in suspense or are just trying to make sure it doesn’t happen to you, knowing why it happens and how to fix it can be extremely valuable for mineral owners.

Why Is Your Money in Suspense?

There are a few common reasons why your funds might be stuck in limbo. It could be as simple as an incorrect address or an unreturned form, such as your Division Order or W-9. It could also have to do with an error in your title that needs to be addressed before things can move forward.

If it’s not a matter of documentation, then chances are there’s some problem involving the determination of the rightful owner of the property. Ownership might have been improperly transferred between relatives, or there may be a complicated dispute between multiple parties.

While an ownership issue will present greater difficulties than a problem in documentation, there are solutions. You just need to know your best course of action.

How to Deal With Funds in Suspense

If you’ve determined that your obstacle stems from a missing or incorrect document, then getting your funds out of a revenue suspense account should be straightforward. Simply making the necessary corrections or turning in the missing documents should likely solve your problem. However, if the title is at fault and it’s not a simple clerical error or typo, then you’ll need to go through the title curative process to solve any defects in chains of title.

If there’s a dispute over the deed or question of legal ownership, you may need to file a claim in probate, a motion to determine the inheritance of the property, or a title action. While you can file these things yourself, it would be wise to enlist the aid of professionals with experience in this area. This might seem intimidating, but many of these problems can be cleared up relatively quickly with the right team in your corner.

3 Mineral Asset Management Strategies

That said, when it comes to dealing with funds in suspense, the old saying holds true: an ounce of prevention is worth a pound of cure. Here are three ways to help ensure your money doesn’t end up in a revenue suspense account:

1. Stay organized. It can be difficult to keep track of all the documents and updates associated with your mineral assets. But by making a concerted effort to organize things and put everything in one place, you’re much less likely to let vital documents slip through your fingers or miss errors that could end up costing you down the road. In today’s world, you’ll likely want to consider digital organization methods, tools, or platforms. Technological capabilities allow you to more efficiently keep track of your assets.

2. Keep the lines of communication open with operators. Stay in touch with the operators you lease with. By keeping the lines of communication active and open, you’ll be more likely to proactively hear about unexpected problems instead of after your funds have been suspended.

3. Enlist experts at the start. Instead of waiting for something bad to happen and then hiring an expert to fix it, consider hiring a professional firm to handle your mineral assets from the start. This will not only make it less likely that your money will be suspended, but it will also unburden you of most management responsibilities. You won’t need to spend time tracking down and contacting operators.

The main point to remember: Whether you’re trying to prevent suspension or dealing with its fallout, you must be proactive and act quickly. The faster you can identify the problem and resolve it, the faster you’ll have your funds at your disposal.

Jason Beck is the ​​director of land and mineral management at Valor, a specialty asset services provider focusing on mineral management, oil and gas operator services, accounting, and back-office outsourcing.

The information provided by Valor in this blog is for general informational purposes only, not to provide specific recommendations or legal or tax-related advice. The blog/website should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.

Both oil and natural gas are important energy sources. While some applications overlap, each asset generally plays its own role in keeping the world going.

When many people hear the word “gas,” they tend to think about the gas that powers their cars. However, it is important that mineral owners learn the differences between types of gas and their varying purposes. After all, the applications and value of these assets depend on whether they’re natural gas or oil-producing mineral assets.

Examining Oil vs. Natural Gas

While they might seem similar, gasoline vs. natural gas is very different. Only the latter is a raw material. Gasoline, which is used to fuel automobiles and other devices that rely on internal combustion engines, is not a gas at all, but a liquid. Unlike natural gas, the end product is not found in nature — it’s a product refined from oil.

If minerals produce oil, then asset owners can take that crude oil and refine it into a variety of petroleum products. Gasoline is the most commonly known oil-derived product, but oil can also be distilled into diesel fuel and oil for heating homes. (Note: Heating homes via oil is less common and more expensive than using natural gas.) Additionally, oil can be used to create commonly used plastics and nylon materials.

On the other hand, natural gas is a literal gas found under the ground. It contains a number of different compounds that can be broken down using cracking plants. Propane and methane are two well-known natural gas products. In addition to heating homes, natural gas is most commonly used for cooking and grilling food, drying clothes, and generating electricity.

The bottom line: Both oil and natural gas are important energy sources. While some applications overlap, each asset generally plays its own role in keeping the world going.

How Valuable Is Oil vs. Natural Gas?

Of course, there’s another difference that asset owners need to consider: the financial value. When it comes to pricing, there are some significant differences between the market value of finished products and the oil and gas lease price per acre.

Unlike natural gas, oil tends to operate on a global market. This means that the value of one barrel of crude oil is often significantly higher compared to one unit of natural gas. It’s important to note that one barrel of oil is equal to about six units (where one unit equals 1,000 cubic feet) of natural gas, so the difference in value between the two isn’t as stark as it may seem.

The global reach of oil, however, also means that its price is much less stable than natural gas. Over the past few years, fluctuations in global supply and demand can have a significant impact on the cost of gasoline and other oil products. When managing an oil lease, it’s important to keep an eye on the market to make the most of assets.

Managing Oil and Natural Gas Assets

Now that we’ve covered the basic differences between oil and natural gas, it’s time to move on to some final vital questions: How would someone manage these assets? Does the management process vary between the two?

Whether land produces oil or natural gas, asset owners can make the most of what they have with the right team at their side. With a partner like Valor, managing oil and natural gas assets gets a lot easier. Valor has a variety of mineral asset clients, which means that we know what to do. And when asset owners aren’t stuck in the weeds, they can focus on other priorities while maximizing their revenues.

An oil and gas lease can provide mineral owners with a steady source of income. It can also be a source of obstacles if you are not well-prepared.

As a mineral owner, you may be approached to sign an oil and gas lease agreement with a company. This step usually comes after the company has already done its due diligence, ensuring that you own the mineral rights to the desired land.

What is an oil and gas lease? It’s a legally binding agreement between you, the mineral owner, and the specific person or company that will extract oil and/or gas from below your property in exchange for royalty payments. These contracts detail how the exploration and production (E&P) of the minerals will happen, and they define how payment will be issued to you, the lessor.

But just because a company has signaled that it’s ready to take the plunge doesn’t mean you need to be ready, too. When it comes to leasing your assets, you’ll want to understand what a lease should include and how you can ensure your rights and property are protected.

Elements of an Oil and Gas Lease

Every situation and lease is different, so it’s important to seek counsel when reviewing a contract. Here is a glossary of elements you may see on an oil and gas lease agreement:

• • The Granting Clause. This clause lays out what rights you’re granting someone in regard to oil and gas extraction and which activities are permitted within those rights. It can encompass a wide variety of activities, including drilling, surveying, transportation, and storage, among others.

• • Damages and Unexpected Costs. Oil or gas extraction can alter the land or other things on it, such as your home, crops, or water. The oil and gas leasing process is when you’ll want to negotiate how you’ll be reimbursed for any unforeseen changes or alterations.

• • Fees and Taxes. A gross or cost-free royalty provision puts a limit on the fee amount that can be taken out of your royalty payments. Depending on the oil and gas lease regulations in your area, you could also face additional taxes. You’ll want to consider who is responsible for paying those taxes and which fees can be subtracted from your payments.

• • Lease Term Limits. There are usually two parts to a term clause in an oil and gas lease agreement. The first is known as a primary term, and it generally lasts between five and 10 years. The second is known as a secondary term, and it essentially continues the validity of the lease as long as there is production and/or other drilling activities as specified in the lease. If you would prefer to set more concrete limits, then you’ll want to review this aspect of the lease.

3 Tips for a Successful Oil and Gas Lease Agreement

Of course, knowing what’s included in an agreement is important, but it’s only one piece of the puzzle. Next, you have to figure out the best way to approach negotiations in order to ensure you get everything to which you’re entitled. Here are some tips to consider:

1. Perform your own due diligence. It can be beneficial to do some research on the company or individual looking to lease your mineral assets. This is also the time to determine if the proposed oil or gas extraction presents any risks to your property or other assets.

2. Partner up with experts. An attorney who is well-versed in this area of law can be a major help during contract negotiations. It’s also advisable to enlist the help of experts in mineral rights management and oil and gas operations, like Valor, to help you more effectively manage the assets that lie beneath your soil. Attorneys and mineral management companies like Valor can help negotiate the best lease terms and the highest lease bonus payments. After all, they’re familiar with the market, have access to lots of data, and know which terms are best for a given location.

3. Don’t negotiate at face value. The old adage “trust, but verify” is a good rule of thumb for the oil and gas leasing process. The other party could make a mistake or put a spin on facts that makes it difficult to discern the plain truth. The negotiation process can feel rushed, but ensure you take as much time as you need to go over your contract and verify what’s being said.

An oil and gas lease can provide mineral owners with a steady, long-lasting source of income. However, without the proper protections in place, it can also be the source of some serious headaches. That’s why it’s important to go into the process without a deadline in your head and with enough knowledge to ensure you’re getting everything you want out of negotiations.

The information provided by Valor in this blog is for general informational purposes only, not to provide specific recommendations or legal or tax-related advice. The blog/website should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.

Knowing how to properly manage both sets of rights can be beneficial in ensuring you maximize the value of your assets.

If you are a property owner, it is important to understand the difference between mineral rights and surface rights. Mineral rights are a form of ownership that gives the holder the exclusive right to exploit, mine, and/or produce any minerals that may be found on or beneath the property. On the other hand, surface rights refer to the rights of a landowner to use the surface of a piece of land for various purposes, such as farming or construction. It is important to know the definitions and how they differ in value.

Definitions: Mineral Rights vs. Surface Rights

When it comes to understanding the rights associated with owning property, one of the most important differences to understand is between mineral rights and surface rights. While both types of rights can have a significant impact on the value of a property, they also differ in some key ways.

Mineral rights refer to the ownership of any resources that are located beneath the surface of a piece of land. This includes things such as minerals, oil, gas, or any other natural resources that may be found beneath the ground. Generally speaking, mineral rights do not include anything found on the surface itself.

Surface rights, on the other hand, refer to the ownership of any resources located on top of the ground. This could include things such as buildings, crops, trees, fences, roads, and more. While the owner of a property can have both mineral and surface rights, they may also be owned by different people or entities in some cases.

In addition, it is important to note that when it comes to mineral rights, the owner of those rights is generally given certain privileges that are not associated with surface rights. These privileges can include the right to explore for minerals or extract them from the ground.

Difference in Value

Understanding the difference between mineral rights and surface rights is important for anyone looking to buy or sell property. While both types of rights can have an effect on the value of a property, they also come with different sets of privileges and obligations that must be taken into consideration. As such, it is important to take the time to understand these details before making any decisions.

When it comes to leasing or selling a property, it’s important to consider all of the different types of interests involved. Before any contracts are signed, it’s important to make sure that all parties understand who owns what rights and how those rights can be exercised. Knowing the difference between mineral and surface rights is a key part of any real estate transaction.

Key Takeaways

1. Mineral Rights Are Separate from Surface Rights

It’s important to note that mineral rights are separate from surface rights. This means that someone can own the surface of the land, but not the minerals beneath it. Similarly, someone can own the mineral rights but not the surface of the land.

2. Ownership of Mineral Rights Can Lead to Profits

Ownership of mineral rights can be incredibly profitable. Since mineral resources are in high demand and often yield a high price, owning these rights gives you the potential to earn income from their extraction.

3. Surface Rights Have Value Too

Surface rights have value as well. For example, if you own surface rights to a piece of land, you have the legal right to build on it or use it for recreational activities. In some cases, these rights can be sold or leased to developers or other parties who may be interested in using the land for their own purposes.

Understanding the difference between mineral rights and surface rights can help you make more informed decisions when it comes to land ownership.

The information provided by Valor in this blog is for general informational purposes only, not to provide specific recommendations or legal or tax-related advice. The blog/website should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.

Oil and gas companies are divided into three categories: upstream, midstream, and downstream.

Each type of company plays an important role in the industry, and they share some similarities while having their own unique differences. At a high level, upstream companies are responsible for the exploration and production of oil and gas, while midstream companies are responsible for the transportation, storage, and distribution of the resources. Downstream companies are the ones that purchase and refine the resources and distribute them to consumers.

Upstream

Oil and gas companies are essential for the extraction and production of the energy we use daily. Upstream oil and gas companies are those that are involved in the exploration and production (E&P) of crude oil and natural gas. They focus on finding potential oil and gas reserves and then extracting the resources from underground reservoirs. They are responsible for the drilling that yields these resources and for regulatory compliance. These steps require extensive knowledge and expertise in geology, engineering, technology and compliance/regulations.

Midstream

The midstream oil and gas sector encompasses the transportation and storage of crude oil and natural gas from their extraction points to their eventual consumption points. It is in this area where oil and gas companies play a critical role in the process, connecting producers with refiners, petrochemical plants, and other end-users. The midstream sector includes activities such as gathering, transporting, storing, processing, and marketing of crude oil, natural gas, and refined products.

The main responsibilities of midstream oil and gas companies include transporting and storing the resources to make them available for sale in the market. To do this, they use pipelines, tankers, barges, and railcars to transport the resources from their extraction points to their consumption points. Midstream companies also provide services such as blending different types of crude oils for better price competitiveness, pumping natural gas through compressor stations to increase pressure for onward transmission, fractionating natural gas liquids into different streams (e.g., ethane, propane, butane), and handling the overall storage and distribution of both oil and gas products.

In addition to transportation and storage, many midstream companies also provide additional services such as trading and marketing of oil and gas products. This allows them to take advantage of changing market conditions and maximize profits by buying or selling resources at optimal prices.

By carrying out their activities in an efficient and reliable manner, midstream oil and gas companies play an integral role in ensuring that the market remains well-supplied with resources. In doing so, they help maintain a steady supply of energy for consumers and businesses around the world.

Downstream

The downstream sector of the oil and gas industry is perhaps the most visible to the public. This is where gasoline and other petroleum products are refined and distributed. Companies in the downstream sector are responsible for taking raw crude oil and refining it into various useful products. Downstream companies also handle the transportation and delivery of products, as well as storage, marketing, and retail sales. These companies can range from small, independent operators to large, multinational corporations. By providing fuel, lubricants, plastics, chemicals, and other products derived from oil and gas, downstream companies play an important role in modern life.

Through these processes and activities, all three sectors help to maintain a steady flow of energy and other commodities that are essential to everyday life.

Holding on to generational assets like mineral rights, rather than selling them off before you pass on, could hold several benefits for your beneficiaries.

When it comes to generational assets, mineral rights hold a lot of potential for your beneficiaries. Instead of selling, consider the gift that transferring your mineral assets could be for your loved ones, both now and in the future.

According to many experts, if you are willing and able to keep your mineral rights for more than 10 years, opportunities for leasing and gaining royalties greatly increase. Therefore, not only are you passing mineral rights to beneficiaries or an entrusted party, you’re also passing the financial benefits that come with rights ownership.

What Are the Benefits of Holding on to Your Mineral Rights?

First, if you lease your mineral rights to an oil and gas operator, you will typically receive a lease bonus. An operator leases the oil or natural gas rights from you and reserves the option to drill on your property over a set period of time called the primary term. Oil and gas leasing are essentially a “reasonable access to leased property” sale that comes with primary and secondary terms. A primary, or definite, term covers the oil and gas exploration and production, while the secondary term covers the life of production in paying quantities. In other words, if the well is not producing, the leasing expires after the primary term. However, if the primary term is up and the well is producing, you or your inheritors hold the lease until production ceases.

If the land is drilled and oil or natural gas assets are found, you can earn royalties on your mineral rights. These royalties can essentially be a means of income for whoever holds those rights. Imagine a monthly royalty check in the mail for as long as the production value lasts.

It’s also worth noting that in most states, keeping nonproducing minerals still means owing property tax or ad valorem tax, but there’s value in asset ownership. The world is not making any more land, and the U.S. is the only country with private mineral ownership, so opportunities to own mineral acres are few and far between. Keeping mineral assets can be a wise move for future wealth, especially if you are living in a period of inflation and experiencing a volatile stock market.

Moreover, the question of how much mineral rights are worth per acre will change constantly. As innovation happens and technology improves, operators will be able to tap into more resources and obtain minerals in new ways that could be financially beneficial to whoever holds the rights to them.

Are There Any Challenges to Inheriting Rights to Minerals?

The benefits of passing mineral rights on as generational assets are many, but that doesn’t mean the process doesn’t have its complexities.

For example, dividing mineral rights among different beneficiaries can be tricky. If you inherit mineral rights along with another party and you own a specific percentage of that asset, you may encounter resistance to fragmenting the rights further by handing them down to your beneficiaries. (However, undivided mineral rights ownership is one of the best and easiest qualities for generational assets ownership.)

Surface owners can also run into trouble by assuming they own the mineral rights connected to the ownership of the surface property. If left uninformed, beneficiaries may have to work out what they’re actually entitled to. Meanwhile, oil and gas companies looking to arrange leases can take advantage of naive title holders and offer rates that don’t match up with the potential value of the asset. In the most extreme examples of uninformed mineral rights holders, predatory mineral buyers can capitalize on unknown mineral rights.

This is why getting a land deed drafted and making sure it’s executed, notarized and filed appropriately is critical.

How to Set Up Mineral Rights Beneficiaries for Success

You want to make inheriting mineral rights as easy as possible for your family or chosen beneficiaries, so how can you mitigate the above challenges effectively? Consider the following steps:

1. Bring in an expert to help manage the process.

It’s unlikely that you or your beneficiaries are experts in mineral rights. One challenge of inheriting rights to minerals is ensuring that you’re capturing their full value, which can oftentimes become a full-time job. Seek out an experienced mineral manager to make sense of your assets, to make sure you hand them down with accurate documentation, and to make the most from them in the form of lease bonuses and royalties. They can be a knowledgeable, invaluable partner who understands specialist information, like the cost basis for inherited mineral rights and the day-to-day operational concerns connected with oil or natural gas assets.

2. Make sure the mineral deed is valid.

To ensure your deed is valid for estate transfer, it must be in writing, the grantee and grantor must be identified by signature, and both parties must have the legal capacity to transfer or accept the assets. They must also be able to locate assets on the ground. It’s frustrating to have a will that tells the reader to “see inventory” when referencing assets but doesn’t include a consolidated, detailed inventory of the mineral assets.

Holding on to generational assets like mineral rights, rather than selling them off before you pass on, could hold several benefits for your beneficiaries. While drafting deeds and obtaining leases may seem complex, with a trusted operator, your assets can become a regular income for your loved ones for years to come.

Matt Autry is the President, Oil, and Gas at Valor, a specialty asset services provider focusing on mineral management, oil and gas operator services, accounting, and back-office outsourcing.

The information provided by Valor in this blog is for general informational purposes only, not to provide specific recommendations or legal or tax-related advice. The blog/website should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.

While property tax statements may feel mundane and tedious, it is imperative that you do not overlook or ignore them.

While most property tax statements are correct and require no revisions, many can include discrepancies that can cost you money. At Valor, our team is committed to reviewing your property tax statements to ensure they are accurate. We do not want to see asset owners being taxed on land they don’t own or paying for a mistake made by a third party.

Basic information and key dates regarding property tax statements:

1. When are property tax statements mailed out?

Usually the first week of October.

Note:  Failure to receive a property tax statement does not waive penalties and interest. Therefore, it is important that you have records of all your property tax statements. 

2. What do I do if I don’t receive my property tax statement?

Visit your local county tax website (where your property resides) to search and access your statement. If you have Valor Mail Services set up, we will complete this process for you. 

3. What is the last day to pay my property taxes without penalties?

January 31st.

Need assistance with property taxes? Let us help! Contact us today and let Valor be your extra set of eyes.

The information provided by Valor in this blog is for general informational purposes only, not to provide specific recommendations or legal or tax-related advice. The blog/website should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.