Fracking And The Impact On Natural Gas Mineral Rights
Over the last few years, fracking has come to the forefront of public attention, but it has actually be a technique that has been in use since the early part of the 1860s. In this early practice detonations were used in the ground to open up deeper reserves of oil and natural gas, and even these had an impact on natural gas mineral rights throughout the country.
Fracking does pose unique issues that should be carefully considered by any landowner or natural gas mineral rights holder in an area here fracking is used. Fracking, or hydraulic fracturing, has come a long way from its first use, and is now able to harvest deep reserves of natural gas previously too costly or too difficult to extract using other, traditional drilling and production methods.
Right now fracking companies, and other natural gas producers are interested in finding landowners and mineral rights owners in areas of interest, those along the various high producing shales throughout the country. Anyone with natural gas mineral rights in these areas has likely had at least one or two offers from different companies, particularly in the form of leases.
Leasing means you are paid for your natural gas mineral rights in a cash bonus or a signing bonus with the company that is typically based on the acres involved in the lease. Then, you will continue to receive a fraction of the production of the acreage once the well or wells are drilled and producing. This will continue throughout the terms of the lease or until the well is shut down or no longer producing. However, there is no guarantee the company will ever drill on your property, which leaves you without any income.
When selling your natural gas mineral rights, you will negotiate the actual sale of your mineral rights, either as a the whole property or some of the property. This gives you a guaranteed amount based on what you think is the fair estimated production for the land and what the natural gas company will agree to pay.
The advantage to the sale, besides tax issues, is that you are guaranteed the amount of money in the contract for your natural gas mineral rights. If the company should choose not to drill, or if prices suddenly bottom out, you still retain the money, which is very different than what would happen if you had elected the lease option.