Category Archives: Information

Buzz Words Every Mineral Rights Owner Should Know

Farmers talk about yield-per-acre; lawyers, about cause of action; and architects, about cornice molding. Virtually every line of work and professional discipline has its own jargon. By the same token, consumers should have some idea of these concepts when, say, buying food, filing a lawsuit or building a home. Terminology and its comprehension are important components in transacting business, and the management of property is no different. More specifically, when you own a plot of land that is rich in minerals—and seek to gain income from those deposits—you are much better off using the words common to oil and gas barons. Here are a few words that every owner of mineral rights should know:

If you own mineral rights, it's important to understand how far down your rights extend.

If you own mineral rights, it’s important to understand how far down your rights extend.

Depth Rights

This tern refers to how far beneath the surface your rights go. A seller might choose to retain rights below, for example, 10,000 feet. If you are buying, the burden is on you to know whether your depth rights are limited or unlimited. Ordinarily, a good rule of thumb is to keep conveyance documents and leases as specific as possible, leaving no room for confusion.

However, know that public authorities may not always recognize the intents of buyers, sellers, and leases. In New York State, for example, a landowner—delinquent on his tax bills—had his property seized by the county. More than one lessee held rights at various depths, and had to battle the taxation authority to retain the mineral rights. One issue that came to a head was the depth to which the tax assessor evaluated the property.

Royalty Interest

A good analogy for royalty interest is found in the publishing business. A publisher will agree to edit, format, print and sell an author’s work in exchange for the copyright. As part of the deal, the publisher will pay a royalty to the author for every book sold. The same holds true in energy production and mining. The energy company seeks access to land owned by another. In exchange for mineral rights, the company agrees to give the owner a piece of the production (and revenue), i.e. the royalty interest. This stands in contrast to the working interest held by the lessee, who shoulders the expenses and labor involved in production.

Whether you have one or multiple income producing leases, it’s important that you track the royalty payments you are receiving from each one. I recently came across a new app that allows users to track their mineral rights and royalties in a very transparent and user-friendly way. Go to www.ingaugeminerals.com if you’re interested in checking it out.

You may lease or sell the mineral rights to a land, which means an oil and gas company will bring their own workers in to extract the minerals.

You may lease or sell the mineral rights to a land, which means an oil and gas company will bring their own workers in to extract the minerals.

Landman

The landman is the individual who negotiates with mineral rights owners for the benefit of energy companies and other businesses that seek access to mineral resources. These professionals can be either field landmen—free-lancers who contract independently—or in-house landmen employed full-time by an oil company, like me. Landmen are involved in diverse tasks:

  • Reviewing and clearing impediments to mineral rights title
  • Interacting with government regulators
  • Consulting with real estate attorneys regarding acquiring rights
  • Strengthening ties and relationships with mineral owners

Of course, there are many other terms with which you should be comfortable when jumping into mineral rights commerce. Like the above, they deal with legal allowances, financial remuneration and the many people you will encounter.

 

What Is Shale?

Shale rock has come to the attention of oil producers looking for new sources of oil and gas to fuel the needs of global economies. It is a special type of rock formation that requires highly technical methods of extraction. Energy companies have developed these innovative methods of extraction to take advantage of this unique resource that is found in many countries around the world.

What Is Shale Made Of?
Essentially, shale rock is sedimentary rock that is very finely grained. It contains, clay, silt and small particles of calcite, quartz and other minerals. Shale is part of a category called “mudstone,” because it is formed by layers of mud and silt that are deposited in the ground. It is unique in that it can break apart into parallel layers more easily than other types of rock. Oil and gas is contained within these layers, which must be broken apart using special techniques that allow this rich resource to be harvested.

How Is Shale Formed?

Shale forms when the environment carries silt, containing a variety of minerals from eroded rocks, and deposits it in layers in a particular region over time. The layers may contain clay, feldspar, mica, quartz and variety of different types of organic matter. These layers become compressed together at high pressure over thousands of years, in a process called “lithification,” which turns it into rock. This material also contains kerogen, which is believed to be the substance that causes oil and gas to form from the compressed organic matter in the silt.

How Are Oil and Gas Extracted from Shale?
A number of different methods can be used to extract oil and gas from the layers of rock in a shale formation. Pyrolysis, hydrogenation or thermal dissolution are common extraction methods. The process used is determined by the type of environmental conditions that exist in a shale deposit, and also, by cost considerations that are involved in the extraction. In some cases, the shale may be removed from the ground and processed in a facility, using a method called “retorting.” However, in other cases, processing occurs in-situ, that is, at the site where it is found.

Article #1_Shale Oil Extraction

More recently, you may have heard of the term “fracking” which is a newer and more controversial method of shale oil extraction. In fracking, a hire pressure mixture of water and sand is directed at the shale, which forces the gas towards the well. The public backlash at fracking stems from concerns about its environmental impact, including excessive water usage, the potential for ground water contamination, and the belief that the practice causes small earth tremors.

Advantages of Shale Oil and Gas
Extracting oil and gas from shale rock offers the world an abundant source of energy for the world’s growing economies and populations. It will increase the number of high-paying jobs in these regions of the world and will provide greater energy independence, as well as increased security for these nations who will no longer have to depend on unstable areas of the world for their energy resources. Shale offers a rich supply of oil and gas for the world’s future energy needs. With modern technology, this resource can help advance economies around the globe.