Land use for oil

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Land use for oil

Post by mrsbetsy » Sun Aug 11, 2019 8:09 pm

I just found out that my family bought oil rights on a property in West Virginia in the 1800s. I own 1/90th of the share. LOL! Apparently, every couple of decades, the property rights come up for renewal. Some poor soul has the responsibility to contact each shareholder (descendants of the original agreement) to let them know. My parents have been deceased for 20 years.

My uncle, who lives in W.VA, says this is legitimate. I sign the renewal contract and receive $50. My challenge is that when I pass, my two children will inherit their percentage and it will be split again amongst the heirs. I have no ties to this side of the family and I highly doubt my kids care.

I did a bit of bantering with the representative and asked what happens if I don't agree. He said if they don't get agreement from all, they would drill around the plot of land. (It's apparently fracking.)

I told him I would think about it. A couple of days later, I received paperwork in the mail. I called him and he said, "Well, we could buy you out if you'd prefer for $500."

My husband says, SOLD.

If my siblings become oil barons, I'm going to be pissed. <joking>

What would you do?

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Re: Land use for oil

Post by Bacchus01 » Sun Aug 11, 2019 8:24 pm

No way would I sell that for $500. $50 is easy insurance for something that could be worth a lot someday.

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Re: Land use for oil

Post by 123 » Sun Aug 11, 2019 8:27 pm

Your children lose a bit of their family heritage if you sell out. For that sake alone I would probably hold onto it. Let them be a part of the "big oil" business.

If you do any research into "oil" rights there are a number of different kinds. Some people also own the land, some only the mineral rights, it can get complicated.
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Re: Land use for oil

Post by Grt2bOutdoors » Sun Aug 11, 2019 8:38 pm

Keep it. Don’t sell!
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Re: Land use for oil

Post by Lalamimi » Sun Aug 11, 2019 8:41 pm

As a retired Landman, I say do not sell. Wait to see what the horizontal unit looks like and how your checks are for the next year. You can always sell to one of the relatives later or donate it to your church. You will be taxed on the royalties, by the way.

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Re: Land use for oil

Post by LilyFleur » Mon Aug 12, 2019 2:50 am

Are they going to drill on the land? It seems odd that you only get $50.

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Re: Land use for oil

Post by Ping Pong » Mon Aug 12, 2019 5:49 am

So the two options are to receive $50 every 30 years or get a lump sum of $500. It sounds like you guys have been getting ripped off all these decades. Those two options don’t really jive with each other. The 200 heirs should put it out to bid with another oil company.

Other posters say to keep it because it may hit jackpot, but it sounds like it has already hit jackpot. You guys have just been letting another company keep it in exchange for 14 cents a month. This company is the one that coined the phrase, “laughing all the way to the bank.”

If the other 199 heirs have already signed for low amounts, then your signature for renewal could be worth tens of thousands. Each share might not be worth that much, but in this special case it’s as if you control everyone else’s share if one party can veto and everyone else signs for peanuts.

Someone else may have already figured this out which may be why there’s always some family member willing to track everyone down to sign. Poor soul.

In all likelihood, everyone else didn’t sign for peanuts. They probably negotiated a more reasonable price. Your side of the family, being out of the loop, may not have thought to. And the other side has no incentive to educate you. Especially if they know the last signee can get the best deal, and the size of the deal is dependent upon how much was agreed to by everyone else.

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Re: Land use for oil

Post by Luke Duke » Mon Aug 12, 2019 8:24 am

Are you sure that it isn't $50/yr?

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Re: Land use for oil

Post by not4me » Mon Aug 12, 2019 9:02 am

As I started to read, my 1st thought was sell. I have personally avoided situations in which >1 family member is equal partner (& advised many more to do so).

But the story wasn’t adding up & I think before I agreed to sell that I’d like to understand better. You said your family bought rights…So, who is paying you now & for what? I would think for rights to be renewed, you’d be paying. So, who is this a representative of? An intermediary between property owner & oil rights owner? What do they get for the $ they pay you?

I get that if all 90 don’t agree, they drill/frack elsewhere. But why does the $ amount not change depending upon that? And it seems odd that you haven’t mentioned proving you are legit descendent.

If you have 90 “owners” & no legal structure (like an LLC, etc), then it sounds like you have no spokesperson, negotiator, etc. You take what’s offered. But is there any liability involved? What if there is an environmental problem?

So, I’d personally want to understand more about what it is I owned before I sold it & understand the value. Or, I’d take the $ & run without looking back.

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Re: Land use for oil

Post by deikel » Tue Aug 13, 2019 3:38 pm

A lot of things don't add up here IMO

If they offer you 500 USD to buy your share, then they would be willing to pay that to any of the 90 holders, so there is someone willing to shell out 45k to get the mineral rights. You don't say how large the property is that you hold the mineral rights to, but this would have to be either a lot of land (which means they can not drill around it) or the land location is valuable for their drilling plans.

Mineral rights don't come up every 30 years, they come up when the last contract ends or when someone wants to buy/lease the rights - so something has happened and this company is interested in giving you money (and the other 89) to have the rights to the minerals...

They can only drill around your property to some degree. Even if the drilling is not on your property, the material taken out of the ground might still come from your property ....and its actually better if they destroy someone eases land but you get the money from the minerals taken out underneath your property.

I would look closely at the contract, take the 50 USD and make sure you get a good percentage if they start taking material out...its worth the lottery ticket and the 'lost' 450 is nothing you had before, but you gain a fun story and a chance of 'free' education for the kids...
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Re: Land use for oil

Post by megabad » Tue Aug 13, 2019 4:04 pm

mrsbetsy wrote:
Sun Aug 11, 2019 8:09 pm
What would you do?
Probably buy up all the land for $45k if that is the deal on the table and then sell the rights myself. If it is $50 per year per share then that is a 10% return assuming the land value is pretty stable.

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Re: Land use for oil

Post by MP173 » Tue Aug 13, 2019 4:25 pm

Keep the mineral rights.

If you want to sell, contact me and I will bid $501.

Lots of frac activity in WV.

Full disclosure...I have mineral rights on family farm and receive monthly oil royalties. Not much, but it is family heritage and monthly cash.


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Re: Land use for oil

Post by psteinx » Tue Aug 13, 2019 4:29 pm

mrsbetsy wrote:
Sun Aug 11, 2019 8:09 pm
My uncle, who lives in W.VA, says this is legitimate. I sign the renewal contract and receive $50.


I told him I would think about it. A couple of days later, I received paperwork in the mail. I called him and he said, "Well, we could buy you out if you'd prefer for $500."
How long is the renewal contract for? If it's $50/year, then selling for $500 doesn't sound so appealing. If it's $50 every 20 years, and the prospects for significant improvement to that rate are low, then getting rid of a minor asset at 10X what you'd make over the next 20 years sounds attractive.

In general, I'd be reluctant to try to wade too deep into a ~90-way family split on something like this. Sounds like a lot of hassle and possible family drama.

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