How to transfer ownership to another person or entity and get into pay status
Transferring Ownership of Mineral Rights
There are four reasons one might need to transfer the ownership of mineral rights:
Death of an owner
Sale of mineral rights
Transfer to or from a trust
The first rule of mineral ownership is “Know what you own.”
Knowing what you own will not only help you get the most out of your mineral rights but it’s crucial when it comes to transferring mineral ownership after a death, divorce, sale, or transferring minerals into/out of a trust. As they say, knowledge is power, and in this case, knowledge can help you maximize your minerals while reducing risks associated with owning minerals.
NOTE: This process varies from state to state so contact an attorney for advice that is specific to your situation. I am not an attorney and this is NOT legal advice.
Transferring Mineral Rights After a Death
Often a new heir knows nothing more than Uncle Joe owned an interest in an old oil well in Texas. They don’t know how much interest was owned or even where the well is located. Non-producing mineral interest may be forgotten because there are no active oil or gas wells and therefore no royalty checks.
How do you find mineral rights when you aren’t sure what you’ve inherited?
Transferring mineral rights after death depend on whether the deceased had a will and whether or not the estate is in probate.
Call the county where the minerals are located and ask how to transfer ownership after death. They will probably advise you to submit a copy of the death certificate, probate documents (if any), and a copy of the will (or affidavit of heirship if there is no will).
If the mineral owner owned non-producing minerals (i.e. there are no active wells and therefore no royalty checks), the transfer is complete when the documents have been recorded with the county and returned to you. Skip to step three.
Once the Affidavit of Heirship has been recorded with the county clerk (or whoever keeps deeds and title records), contact the oil and gas well operators to find out what documents they need to transfer ownership. They will probably require the following:
Copy of the Death Certificate
Copy of the recorded will (or Affidavit of Heirship if there was no will)
Completed W9 Form with the new owners’ information
After analyzing the documents for correctness and completeness, they will transfer ownership to the new owner(s) and send out division orders. After you verify the information and sign the division order, you should begin receiving royalty checks.
Every situation is different, and an attorney or a landman can help you navigate this often complex situation.
Congratulations, you own mineral rights – a privilege that exists almost exclusively in the United States.
The first rule of mineral management is to know what you own, so write down exactly what you own and keep it in a spreadsheet while storing the original documents in a folder.
During a divorce, all property is divided between the two parties in the manner agreed upon or by court order.
Transferring Non-Producing Mineral Rights After a Divorce
After a divorce, mineral rights can be transferred by submitting the divorce decree and conveyances to the county (where the minerals are located) for recording. They usually go to the same agency that records titles and property deeds.
The county will return the recorded original documents to the new owner. Because there are no producing wells on the tract of land, the transfer of ownership is complete. The only thing left to do is keep good records of what you own while you wait (and hope) for someone to offer to lease your minerals.
Transferring Producing Mineral Rights After a Divorce
The first step of transferring mineral rights is the same for both non-producing and producing mineral rights: conveyances and a divorce decree must be recorded by the county where the mineral rights are located.
When you get the recorded original documents back from the county, copies can be forwarded to the operator of the well(s). The operator will review the documents for accuracy before transferring the ownership and sending out new division orders. You will start receiving checks shortly after reviewing and signing the division orders.
This is the general procedure:
Submit divorce decree and conveyances to the county for recording.
Submit the recorded conveyance and divorce decree to the operator.
The operator will review the documents and transfer the ownership, sending out new division orders.
Review and sign the division orders (and W9)
NOTE: Consider asking your attorney if you should notify the operator of an impending divorce so they can put the royalties in suspense until the ownership has been transferred.
Selling Your Mineral Rights
Although everyone says you should never sell your minerals, many people do and they sell for a variety of reasons.
Why do people sell their mineral rights?
People sell their minerals for a variety of reasons, including:
They might prefer a lump sum payment rather than wait for someone to drill a well (which might be a dry hole).
New wells decline substantially and perhaps the owner has received most of the value from the well and would rather receive the rest in a lump sum rather than continue to receive declining royalty checks.
They own such a small interest that it isn’t worth the management headache.
They inherited the minerals but are socially or politically opposed to profiting from fossil fuels or fracking operations.
They need the money to pay for medical bills, a reliable car, a house, or even a child's wedding.
How Do You Sell Your Mineral Rights?
Selling mineral rights is easy. The buyer does most of the work – you just show up with your pen and walk away with the money. The buyer will draft a mineral deed or a mineral conveyance document, which is a legal document assigning all or part of your mineral rights to the buyer.
Once the document is signed, it’s up to the buyer to have the documents recorded with the county where the minerals are located, notify the operator, and sign division orders.
NOTE: Mineral ownership is a really special thing. Think long and hard before selling your rights and if you do want to sell, consider an auction or find a private individual buyer. Shop around and don’t sell your rights because someone sent a letter offering just over the property tax valuation – they are probably worth more!