What Are Oil & Gas Mineral Rights?

So what exactly are oil and gas mineral rights? Mineral rights ownership refers to the legal rights of an individual or entity to exploit, mine, and/or produce subsurface minerals beneath a property. Natural resources such as oil, natural gas, coal, gold, and more are included in this ownership. Mineral rights ownership is an investment in real property, and these assets are owned in perpetuity. Mineral rights may be owned alongside surface rights, or may be owned separately. One major benefit of a Self-Directed IRA (SDIRA) is that it can be used to invest in alternative assets like oil and gas mineral rights.

Benefits of Mineral Rights Investing

Mineral rights can be leased to an oil and gas operator, thus allowing them to develop the minerals. In this arrangement, the mineral owner is free of the risk and responsibility associated with the development of those minerals while receiving a monthly royalty percentage of the income generated from the production of oil and gas assets. Here are some of the main benefits of mineral rights ownership:

  • Real Property: Mineral ownership is an investment in real property, like real estate. It is owned in perpetuity.
  • Zero Expenses: Mineral owners pay ZERO expenses or costs to drill and operate an oil and gas well.
  • Oil and Gas Reserves: Mineral owners are paid for every zone or reservoir that exists within their defined mineral boundary, regardless of depth or cost.
  • Paid First: Mineral owners are paid first before anyone else from the oil and gas produced and sold.
  • Monthly Passive Income: Owning minerals allows an investor to receive income and future values that are not market correlated.
  • No Liability: Mineral owners do not incur any liabilities for the exploration and production of oil and gas molecules.

Are Mineral Rights Real Estate?

Owning mineral rights is much like owning real estate, because it is real estate. Think of it as real estate flipped upside down. Instead of owning on the surface, mineral owners own what’s below the surface. Mineral rights are titled and deeded, and everything is recorded in the courthouse. The tenant, or lessee, is the operator leasing the mineral rights to produce oil and gas. The mineral rights owner is essentially the landlord, except there is no maintenance, property taxes, mortgages, or other ongoing costs associated with real estate.

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