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Buying the Entire Basket of Mineral Rights -- Its Time to Acquire Mineral Rights Now While the Price of Oil is Cheap

It's time to buy the whole enchilada, the chocolate cake under the icing, the entire basket of mineral rights -- while oil prices are low.

A family came to an open house the other day and stated that another realtor had told them that the oil rights never come with the land.  I am so sick and tired of hearing that.  Just because realtors don't know about oil & gas does not mean they should say what isn't true.

Here is the problem.  In Oklahoma there are two government agencies that come into play regarding our land -- the Oklahoma Real Estate Commission (OREC) and the Oklahoma Corporation Commission (OCC).  OREC governs real estate transactions.  The OCC governs oil & gas transactions -- the basis of our state's entire economy.  Their jurisdictions are a legal abstraction to try to explain how to convey a basket of rights that is either completely full or has been divided up into several different little baskets that are filled to a greater or lesser degree by the buyers and sellers when they enter into legal transactions.

However, under it all is the land.   The concept of fee simple absolute covers the entire bundle of rights from the center of the earth to the air space above.  Think of the whole banana, the big enchilada, the entire chocolate cake that is the land, or a big basket of rights.  If you have your property in fee simple then you have the biggest possible basket -- and it is full to the brim. 

You can then sell the surface only and retain your mineral rights.  The fee estate now becomes a split estate.  In this case you put the surface rights (the icing on the chocolate cake) into two smaller baskets: one basket is filled to the top with the surface rights and everything else that you did not retain (water rights, air rights, etc.)  and keep another basket filled to the top with oil and gas rights.  The basket of surface rights has one owner.  The basket of oil & gas rights has another owner (the original owner).

The original fee owner can pass on any portion of the mineral rights with the surface of the land.  Let's say that the original owner retain's fifty percent of the oil & gas rights.  Imagine that the original owner has a basket that is half full of mineral rights (half of the cake part of a chocolate cake).  These severed mineral rights are now considered personal property and are no longer considered real estate; the severed mineral rights are now part of the mineral estate and will be conveyed by a Mineral Deed.

It is important to understand that the mineral estate is dominant and the surface estate is servient.  The mineral owners, their lessees, and their assigns must have access to an adequate amount of the surface in order to develop the minerals.  In Oklahoma, this means that when push gets to shove the mineral estate will win,  The surface owners have limited rights and their best option is to be really really nice to the operators who come on their land to explore and drill for oil & gas.

The new surface owner has a basket of surface rights that is full of pretty chocolate icing plus another basket of mineral rights that is filled half way up with the cake part of the chocolate cake; both baskets are linked together by the deed and will remain linked until the new owner or future assignees sever the tie between the two baskets.

Future owners of the mineral rights (the descendants of the original landowner) can continue to divide up the mineral rights into smaller and baskets -- but no one is keeping track of that.  Although mineral deeds will appear in the land records of the offices of county clerk, these deeds will not be included in a surface abstract because the title insurance companies do not insure the mineral rights.  That's where you have to hire a landman and a good title attorney to find all the owners of the little baskets -- and buy those baskets while the price of oil is cheap.  You need to have more than fifty percent of the mineral rights in your basket in order to have any control over the minerals under your land.

Just to confuse the issue, the coal at the surface is typically conveyed with the surface rights and will belong to the surface owner rather than be split along with the oil and gas rights in the mineral estate.

The tax assessor will only help you identify the owner of the basket holding the surface rights.  It's tricky, but it can be done.  I know many landowners who have bought back the mineral rights under their land.  I would encourage everyone to do so.

Why buy your mineral rights under your land?  It's simple -- you do it so that nobody else brings a D6 dozer and a drilling rig onto your land without your control or benefit to you and your family.  Trust me, there's lots of oil and gas here that is unexplored.  You want to be part of it -- either stop it from happening or get a piece of the action.  I've been to the new drill sites in Tulsa County where they have struck oil three times in the past week in an area that was previously unexplored. 

By the way, does anyone know the descendants of Conn Linn?  Tell them they own 50 percent of the mineral rights in the new Mayo-Moore oil lease.  Their royalties will escheat to the State of Oklahoma after 7 years.  Conn Linn died in 1953 without children.  He was born in 1868.  The descendants of his siblings may have a right a little basket of oil & gas rights.  There was a will, but the heirs could not be found easily.  When the oil company who drilled the lease could not find the heirs to Conn Linn, they went ahead and signed a lease with the trust company who owns the surface and the other 50 percent of the minerals.  They were able to drill because of a legal process called pooling

The above is a great example of why you must own more than fifty percent of the rights to your oil & gas.  Pooling is what is done to drill anyway when an operator has a lease for at least fifty percent of the oil and gas rights in an area where the operator has other leases around the target lease.  They unitize the leases together into a pool.  It's complicated. 

To prevent being pooled, try to acquire more than fifty percent of the oil and gas rights for your basket.

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Debbie Solano, CRS, ABR, CDPE, CHMS, e-PRO, GRI, REOS, SRES
Coldwell Banker Select, Realtors -- Land & Ranch Division
4408 S. Harvard Avenue
Tulsa, OK  74135

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Cell:  918-724-8201

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Comment balloon 0 commentsDebbie Solano • September 30 2009 11:42AM
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