Mineral Rights in Texas

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Texas Mineral Rights History ​

The first Spanish conquistadors arrived in Texas in 1519, discovering a region occupied by numerous Native American tribes. In December of 1845, Texas became the 28th state of the United States.

Texas has a long history of natural resources, including oil and natural gas, as well as other minerals. Because of its size, the state has long had rich natural resources such as oil, natural gas, and other minerals. Mineral rights in Texas are difficult to understand because of changing court rulings and may be quite complex leaving the typical property owner uninformed and at a disadvantage.

When presented with such concerns, mineral owners should consult with an experienced oil and gas firm when making decisions, especially if dealing with a mineral buyer, that may not be transparent and therefore may not be offering you the best price.

Understanding the details and nuances of Texas mineral rights when selling or leasing mineral interests for fair market value, is essential in the selling process. It requires knowledgeable oil and gas people with a long history of helping mineral rights owners while providing a large network of the best potential buyers who pay a fair price, whether for the bonus payment on an oil and gas lease or when selling mineral rights.

What Are Mineral Rights and Who Owns Them?

The mineral rights in Texas, unlike surface rights, are the rights to minerals located beneath the surface of a piece of property. Similarly to Mineral Rights in Oklahoma,  mineral estate owners in Texas have the right to extract oil, gas, salt, uranium, and sulfur from beneath their land.

As for surface owners and their rights, Texas courts have found that gravel is not considered a mineral and is therefore not covered by the term “mineral rights.” The court ruled in Heinatz v. Allen that the following substances are excluded from the notion of “minerals” : “sand, gravel, and limestone.”

Also, in the Moser v U.S. Steel case, the court in Texas excluded generic grants or reservations of “other minerals” freshwater, limestone, building stone, caliche, surface shale, and sand and gravel. The courts in Texas ruled that these are considered part of the surface and owned by the surface owner.

Oil and Gas Production in Texas

The First Well

Melrose, in Nacogdoches County, was the site in 1866 of the first drilled well to produce oil in Texas. But it was not until June 9, 1894, that Texas had a major discovery.

Spindletop, 1901

Jan. 10, 1901, is the most famous date in Texas petroleum history. This is the date that the great gusher erupted in the oil well being drilled at Spindletop, near Beaumont, by a mining engineer, Capt. A. F. Lucas.

County Information

There are 254 counties in the State of Texas. Since 1970, production figures have been compiled from records of the Railroad Commission of Texas (RRC). You can look up monthly oil and gas production by the county at the RRC website. In January of 2022, the top 7 oil-producing counties were Martin, Midland, Upton, Howard, Andrews, Regan and Glasscock. There were 29 counties that did not report any oil production.

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Texas Mineral Basin and Shale Plays

Permian Basin: Western Texas

The Permian Basin is an oil-and-gas-producing area located in West Texas and the adjoining area of southeastern New Mexico. The Permian Basin covers an area approximately 250 miles wide and 300 miles long and is composed of more than 7,000 fields (best represented in Railroad Commission of Texas production figures as districts 7C, 08, and 8A) in West Texas. Various producing formations such as the Yates, San Andres, Clear Fork, Spraberry, Wolfcamp, Yeso, Bone Spring, Avalon, Canyon, Morrow, Devonian, and Ellenberger are all part of the Permian Basin, with oil and natural gas production depths ranging from a few hundred feet to five miles below the surface.

Other areas within the greater Permian Basin include the Delaware Basin and Midland Basin. The Delaware Basin includes significant development in the Bone Spring and Wolfcamp, together known as the Wolfbone. The Midland Basin includes significant development in the Spraberry and Wolfcamp, together known as the Wolfberry.

Eagle Ford Shale: Southern Texas

The Eagle Ford Shale is a hydrocarbon-producing geological formation of significant importance due to its capability of producing both natural gas and also more oil than other traditional shale plays. The shale play trends across Texas from the Mexican border into East Texas, roughly 50 miles wide and 400 miles long with an average thickness of 250 feet. The shale is named for the town of Eagle Ford, Texas, approximately 6 miles west of Dallas, Texas,

Barnett Play: Texas

The Barnett play has been called the largest natural gas field onshore in the United States. It covers over 5,000 square miles in Texas. Because of the rock and sand that is around the hydrocarbon deposits, this is also one of the most difficult plays to extract. Luckily, with the technology that we have today, such as hydraulic fracturing and horizontal drilling, we are able to get more of these resources than ever.

Drillers in this play are able to produce about 4.5 billion cubic feet of natural gas and they get about 15,500 barrels of crude oil each day.

Granite Wash Play: Texas And Oklahoma

With a rich area of mineral deposits, the panhandle area of Oklahoma and Texas makes for a great drilling area for natural gas and crude oil. There are formations at approximately 11,000-15,000 feet in the Granite Wash play. The wells in this play have up to 15 frac stages. This play produces about 27 million cubic feet of natural gas and nearly 3,200 barrels per day of oil.
This is also a newer play, meaning that production is expected to increase over time.

Haynesville Play: Louisiana, Arkansas, And (East) Texas

Haynesville play is known as one of the big players in getting production companies to rethink their business practices and models. It also helped significantly in lowering the price of natural gas in the United States. In fact, this play produces about 10 percent of the United States’ daily supply of natural gas.

This play yields 6.7 billion cubic feet of natural gas and 57,000 barrels of oil each day, making it one of the biggest contenders for shale plays in the country.

Top Oil Producers in Texas

An annual compilation of oil and gas producers in Texas by rank is provided by the RRC. In 2020, the last year currently available, the top 5 oil-producing companies were:

Types of Texas Mineral Rights Explained

Producing Mineral Rights versus Non-Producing Mineral Rights in Texas

Texas property owners owning a mineral interest with production are called royalty owners because they receive royalty payments. These mineral rights owners have producing mineral rights. When an oil and gas company with working interests are sending royalty payments for mineral interests, it increases the mineral rights value for the mineral owner.

We will talk more below about the fair value for mineral owners as you will most likely be approached by mineral buyers when owning a mineral interest in prime areas, like the Eagle Ford Shale or the Permian Basin portions of Texas.

Texas land in the Haynesville, located in East Texas, is another spot frequented by mineral buyers looking to buy mineral interest from royalty owners where the property is under gas fields. Gas royalties have provided more money for royalty owners because natural gas was just recently at nearly a 14-year high, which is extremely helpful to mineral rights owners in East Texas.

Many mineral owners have both producing mineral rights and non-producing mineral rights in Texas.

Mineral rights owners who own mineral interests without any production and royalty payments, own non-producing mineral estates, and these mineral owners who choose to sell mineral rights have a hard time finding mineral buyers and sometimes even oil companies who will lease their minerals and provide them bonus payments. It is hard for mineral rights owners to derive any mineral rights value out of their minerals when they can’t even get an offer to lease.

Selling Mineral Rights in Texas is Your Decision

Selling your real property, whether the surface estate or mineral rights is a personal decision made by hundreds of Texas property owners every day. You probably remember your grandparents saying “never sell your mineral rights”, but that just isn’t true all of the time for everyone.

Many Millennials today would rather diversify and invest in other areas outside of fossil fuels, as the world slowly works its way toward renewables.

Are There Any Tax Reasons to Consider When Selling Mineral Rights in Texas?

This particularly applies if you have inherited a mineral estate, as mineral owners in this category will pay more in taxes collecting royalty payments than royalty owners selling mineral rights and paying most likely long-term capital gains. The key here is a common practice where the mineral owner is given what is referred to as a step-up in basis, or stepped-up basis, which is what happens when the price of an inherited asset on the date of the decedent’s death is above its original purchase price.

The tax code allows for the raising of the cost basis to the higher price, minimizing the capital gains taxes owed if the asset is sold later.

The best protection here for any mineral owners whose ownership in mineral estates was created by inheritance is to contact their accountant to discuss this topic as he or she can answer questions on this IRS topic.

Selling Texas Mineral Rights – What To Avoid

There are several types of mineral buyers who will contact you either by letters in the mail and/or over the phone. Some will offer outrageously low offers, hoping to catch you off guard and make a deal quickly and significantly below true value of your minerals. This type of buyer will never offer the best price.

Other buyers will go the opposite and offer extremely high offers that seem to good to be true, and they are. Their intent is to get the mineral owner interested and working with them, then back pedal and pay two-thirds or less of what they initially offered.

Both of these buyer types are “Flippers” using two different tactics to coerce mineral owners to sell mineral rights.

Many mineral buyers have websites that seem user-friendly and will provide an offer via email simply by you filling out an offer form with limited information. Stay away from the websites that offer this process as they are usually flippers too, looking to buy your mineral rights in Texas at a discount.

The other group you should avoid is the “Brokers”, who are interested in guiding you to sell mineral rights, sometimes for “free”. They provide you an offer but they deal directly with the buyer, keeping you in the dark about the real transaction details. They are trying to make the “delta” or difference between what you will sell your mineral rights for and what the buyer is willing to pay. Stay away from any websites with “broker” in the moniker.

P.S. ~“Lease brokers” who work for an oil and gas ccompany are fine to work with to lease your minerals, but not “mineral brokers” who want to represent and sell your minerals.

Selling Texas Mineral Rights – The Best Way for The Best Price

RedRiverHub.com - You can Lease or Sell mineral rights.
The first safe and secure platform for sellers to market their mineral and royalty interests

This is a platform developed by mineral owners, for mineral owners. It’s straightforward and secure, with the option of accepting, rejecting, or counter-offering all on one’s own without the need of a mineral broker running interference and muddying the water.

The platform is “closed” as both mineral owners and buyers are vetted – with no access allowed to flippers and brokers masquerading as qualified buyers, or fake buyers trying to flip mineral interests they don’t own yet.

If you are looking for an oil and gas company to lease your mineral rights in Texas, request access now at redriverhub.com. If you currently have an offer to lease or sell your minerals, make sure you list with Red River Hub to receive additional offers. We can answer any questions you may have about current offers before you list with us as our mineral rights experts will consult with you for free.

Want Expert Help?

Free half-hour phone call where you can ask questions about your particular situation regarding your oil and gas mineral rights.

Key Takeaways

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