Are you interested in learning how to buy mineral rights, or oil and gas royalties? Many of these transactions are conducted privately, but there are ways to buy. Do you know what they are?
There’s more than one way to search for oil royalties, gas royalties, even mineral rights and related transactions. They include:
- Auctions, sealed bids, etc.
- Tax sales
- Direct purchase from mineral owners
Where auctions are concerned, there are accredited investors and those who are not accredited. Some auctions or other transactions may be restricted to accredited investors and your seller may contact your broker to make sure you as the buyer meet the requirements. Know before you commit!
How to Buy Mineral Rights: Auctions
Some auctions are open to all. Others are only meant for accredited investors. Not all auctions will limit themselves to oil rights or other specific individual royalties. You may experience auctions where oil, gas, and mineral rights are featured together. Some auctions may divide “surface” and “minerals” and auction them off separately.
The negotiated sales approach requires a broker in many cases. These transactions tend to run large according to many sources, and if you are not investing six figures or more the negotiated sales approach may not be for you depending on circumstances.
Negotiated sales may require more investigative work–the “due diligence” of the transaction to make sure all parties are who they say they are and actually are selling the royalties they claim to hold.
Some may choose to sell oil and gas royalties as a way to reduce tax liability, and such transactions may be available directly from the owner, via a broker, etc. In any case, it is crucial to remember some things when pursuing the means to collect oil royalties or gas royalties:
- A sale is commonly thought of to be forever. A lease is different. Make sure you are buying, not leasing (unless that is what you want) the rights, royalties, etc. Leases can be long-term contracts depending on circumstances.
- State law can affect leasing these rights and royalties–some states have rules on the books requiring oil or gas rights to revert to the surface owner after a set period of time unless certain conditions are met. Know what your state’s laws say about buying, leasing, and transferring these rights and royalties.
- Carefully research the seller when you are considering a purchase and make sure you know state law about who is required to sign the purchase agreement. If there are multiple owners your state may require the entire group to sign.
- Those who buy and/or sell oil and gas royalties should know the tax implications of owning or disposing of such royalties. Ask your tax preparer about capital gains taxes and how they may apply to your purchase or sale of oil and gas rights.
Buying Oil And Gas Royalties
There are many third parties who buy and sell royalties, rights, etc. including but not limited to:
- America’s Choice Royalty Partners
- Evanson Auctioneers
- Oil & Gas Asset Clearinghouse
- Mid-Continent Energy Exchange
- Simon Energy Assets
- Mineral Focus
- Mineral Marketing
- Mineral Insight
- Wiggins Auctioneers
Joe Wallace specializes in personal finance, military affairs, and consumer protection topics. Since 1995, his work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and collects unusual vinyl records, which gives him an excuse to write the vinyl blog Turntabling.net.