When you own land with natural gas deposits on the land, you may own the mineral rights to the land. This means you are entitled to the natural gas royalties associated with the lease of the natural gas. You basically are standing on money waiting to happen. Your investment in land has turned out to have sellable resources below the surface. The benefits become clear when a company wants to lease your mineral rights. Keep your rights untouched and it will not do much good. This is like having gold and never cashing it in. Lease royalties and you are looking at a large checks coming to you regularly.
What Are Natural Gas Royalties?
In order to understand what royalties are and how they work when it comes to natural gas, consider a couple of scenarios. Think of the rock star selling songs and albums. The rock star makes a certain percentage of the sales and other income. Now think of your land with natural gas rights in your ownership and a mineral lessee offers to lease the gas supply for a period of time. They then sell this gas on the market and make a profit. The royalties paid to you are an agreed upon percentage of the total production income. The logistics of this depend on the contract you make with the natural gas lessee.
Natural gas buyers have to consider royalties as well. They have to make the best of selling the gas purchased from mineral rights owners. The higher their overall sales per unit, the more they can offer to sellers in terms of royalties. The idea is mutual benefit for both the lessee and leaser. Obviously, the lessee needs to keep the royalties reasonable to ensure their profits are at or above goals. Regardless, natural gas royalties often work out to be quite favorable for the seller or leaser.
Leases, Sales, and Property Ownership
There are different types of land ownership. Owning land with natural gas deposits below it does not necessarily mean the owner of the land owns the mineral rights beneath it. The mineral rights and royalty rights could be the property of another owner, such as a gas and mineral company or a neighbor. If both the surface property and the mineral rights were purchased with the land, then the mineral rights are owned by the land owner, as long as the minerals do not cross property lines.
If the real estate negotiation was only for the purchase of surface land and another buyer purchased the mineral rights, there is going to be a differing ownership. Similarly, different states have laws governing the transfer of rights concerning natural gas mineral rights and division of ownership based on property lines. All of this affects how royalties are distributed.
Land and Mineral Companies
Fortunately, there are companies who help coordinate these different aspects between buyers and sellers, and they help distribute royalties. With the help of an experienced mediating company, both buyers and sellers of valuable mineral rights and royalties can gain the greatest benefit from different situations involving royalties and natural gas.
