How Much Are Mineral Rights Worth? Key Factors to Know

If you own mineral rights or are thinking about buying or selling them, one big question is: ”How much are they worth?” The truth is, there is no one size fits all answer.

The value of mineral rights depends on several factors, like location, what resources are underground, and current market conditions. 

In this blog, we will break down the key things that influence the value of mineral rights, helping you better understand what goes into determining their worth. 

What are Mineral Rights?

Mineral rights are the legal rights to explore and produce the minerals beneath the land. These rights are granted to the person with the presence of minerals beneath the land he owns. A person with mineral rights can not only explore and produce the minerals but also lease his land to oil and gas companies. 

When the land is leased to such companies, only they are responsible for all the activities on the mineral owner’s land, from drilling a well to producing oil and gas from it. In exchange, these companies offer a share of revenue to the mineral rights owner without any of the physical intervention of him/her. Along with mineral rights, the person is also eligible to own the surface rights. 

These rights are different from mineral rights. The person with surface rights can only use the surface for agricultural or any other purposes but cannot access the minerals beneath it. To access the minerals, it is mandatory to have mineral rights. If you have mineral rights, you can also get the benefit of revenue from oil and gas companies. 

In some cases, when you decide to engage in mineral rights in detail and want to value your mineral rights, you can choose different ways for it. You can value your mineral rights in different ways. 

Different Ways to Value Mineral Rights

If you have bought the mineral rights at a certain price, you expect that they should be valued more than the buying price. However, when valuing your mineral rights, you must consider the current market prices of mineral rights or even consult with mineral experts. Below are some ways that can be taken into account to value mineral rights. 

• Understanding the Fair Market Value:

You must understand the fair market value to buy or sell mineral rights. The values are often determined on the open market among various entities associated with mineral rights. 

• Calculating Book Value: 

Book value is the total value of mineral interest once the exploration project has paid all the debts related to it. You can calculate the book value to get the exact value for your mineral rights. 

• Knowing the Insurance Value: 

These values are appraised values by any insurance company that decides a fixed insurance price as a part of the risk assessment. You should know these values so you get an idea about the insurance value for your mineral rights. An insurer has an incentive to reduce the valuation in order to lessen future insurance payouts, even though they may use the fair market value.

• Looking up on Appraised Value: 

You should look upon the appraised value to know the exact price for your mineral rights. Comparing the mineral rights’ valuation to that of neighboring land will be the appraiser’s main focus. A real estate appraiser’s assessment of the land, which may or may not take surface and subsurface mineral rights into account, is not the same as this valuation.

How to Estimate the Value of Your Mineral Rights?

Online resources for mineral rights are frequently used by mineral owners who are attempting to figure out how to determine the value of their rights. As internet platforms may sometimes offer inaccurate information, this is not a suitable method for estimating the value of your mineral rights.

The value of mineral rights cannot be precisely determined, which is the reason. Some services that provide mineral appraisals will make claims that they can accurately determine the worth of your mining rights. Accurate information is not always provided by these providers. 

Each property is different. Multiple factors like your land’s potential, area, and geological characteristics, among others, influence its value. The value of mineral rights can’t be accurately calculated. So it would be a better option to take help of professionals to know the true value of your mineral rights. However, you can search for the average price per acre for mineral rights. 

Average Price Per Acre for Mineral Rights

The average cost per acre for mineral rights in different counties is a question that mining specialists ask all the time. Their conclusion is that there is no average cost per acre for mining rights! The rationale is because each person’s ownership of mineral rights is unique. 

Assume that all six wells that will fit on your acreage have already been drilled and that you have mineral rights with a 12.5% lease. For years, these wells have been produced. Your next-door neighbor, who has a 25% lease, recently closed one of their 1950 vertical wells. On his property, the operator is drilling six new horizontal wells with a drilling pad set up. Even if someone lives next door to your acres, their worth can be very different. 

Since there isn’t much oil remaining, your mineral rights might be worth $1,000 per acre, but your neighbor might receive an offer for $10,000 per acre based on an active rig and a 25% lease. This explains why the average price per acre for mineral rights is nonexistent. Even within the same wells, each owner is different. The average price per acre for mineral rights depends on a number of factors, including your ownership type, lease royalty percentage, and the terms of your lease agreement. 

Determining  the Value of Non-Producing Mineral Rights

What happens if your mineral rights don’t bring in money from oil and gas royalties? You have non-producing mineral rights if they don’t generate royalty income. One of two types applies to your non-producing mineral rights. You have either “Leased” or “Non-Leased” mineral rights. If you have signed a lease agreement during the last three to five years, you will typically be able to tell if your mineral rights are leased. If you have non-producing mineral rights, it is impossible to determine their value. 

• Leased Mineral Rights: 

As a general guideline, the value of your mineral rights that are currently leased should be two to three times the lease incentive. In most situations, this general statement about mineral rights values is valid. 

This implies that your mineral rights would probably be valued between $200,000 and $300,000 if you were to sell them, given that you earned a lease bonus of $100,000 (total). This is a decent general estimate for existing leased mineral rights, while there are other reasons why the value could be higher or lower. 

• Non-Leased/Non-Producing Mineral Rights:

There is no precise rule of thumb for the value of mineral rights if they are not actively leased or produced. The value will frequently be between $25 and $250 per acre. Depending on a number of variables, your mineral rights may be worth nothing or much more.  

Final Thoughts

The value of mineral rights depends on many factors, such as location, resource availability, and market conditions. There is no universal price or method to determine their worth because every property and situation is unique. 

Understanding key valuation methods, such as fair market value, appraised value, and lease agreements, can help you estimate your mineral rights’ worth. However, always approach valuations cautiously, consult experts, and remember that the value of your mineral rights may differ significantly from others, even in the same area.

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