Oil and Gas Royalties - Leasing Mineral Rights While the masses believe that benefiting from oil and gas royalties is a hard job, it really is not as complex as perceived. Once a person knows the basics, making profits and generating cash from oil and gas royalties is fairly easy. The rule is simple and easy; if you own a farm, you have rights over its land and surface too. Most deals ensure that the buyer of a land has rights over the land as well as the minerals in the land, which means that the landowner has the right to legally extract any natural resource from that particular piece of land and explore it as much as they want to. Not only do they have the right to extract any coal, oil, gas, Helium, Uranium or any other kind of minerals or natural resource present in the land, but they also have the right to sell it to whomever they wish to. This is how landowners can generate cash from oil and gas royalties and selling other minerals extracted from their land. However, the challenge occurs when landowners are unaware of appropriate geological knowledge or information that is required to generate cash from selling minerals or selling oil and gas royalties. It is a common observation that a majority of landowners actually forget that they even have mineral rights in the first place, let alone making an effort to generate cash out of them. Moreover, a normal landowner may not even have the extravagant budget required to explore various kinds of minerals or oil, gas and hydrocarbons. Exploring mineral resources require an
elaborate multi-million dollar exploration fund, which is unaffordable for general landowners. The solution to this is outsourcing to energy companies because they have the knowledge, skill and funding that is essential to explore mineral resources. In fact, when these energy companies identify an area that contains minerals, they usually put an effort to communicate and strike a deal with the landowners to lease their mineral rights. According to such lease agreements, the energy companies are allowed to use that land to extract minerals, oil, gas and hydrocarbons and process and sell them to the market. In return, they pay an agreed amount to the landowner who would not have been able to benefit from these natural resources alone. Even though the landowner sells the mineral rights, the land remains his or her property even after the mineral lease expires. There are two major kinds of compensations that a mineral rights owner can receive; bonus payment and royalty. Bonus payment is one where the landowner is given a signing bonus per acre. The usual amount ranges between $200-$500 and at times, it can be the only money received by the landowner. In royalty, however, the landowner receives a percentage from the total capital raised by selling the oil and gas from the land. This percentage is usually 12.5%, but it has also been noticed that at times it can range up to 25% too. This percentage primarily depends on the significance, price and quality of the minerals that are extracted from the particular land. Read More‌