Should you Sell Mineral Rights

Figuring out whether you should sell mineral rights or hold onto them is a difficult decision.

You’ll find strong opinions on both sides of this argument because there is no right answer.   The decision to sell mineral rights is a personal one.   Since it’s a personal decision, the best thing we can do is lay out the pros and cons of selling mineral rights.  You will need to take some time and consider your options.  Whether selling mineral rights is a smart decision for you is only something you can determine!

The Case for Holding Onto Mineral Rights

If you are in a financial position where you don’t need the money for anything and you are willing to hold onto your mineral rights for a long period of time (10+ years), holding might be the right option for you.    Here are some of the benefits of holding onto your mineral rights:

  • Leasing:  When you own the mineral rights, the first step in the drilling process is leasing mineral rights.  You will receive a lease bonus when you lease your mineral rights to an operator.  Think of this lease bonus as a rent payment on your property.  They don’t own the property, they simply have the option of drilling over a 3 to 5 year period.   You can make money by leasing your property out numerous times.   If they don’t drill, you still own the property and you can lease the property again and make more money.
  • Royalties:  When you hold your mineral rights, you are hoping that your property is leased and eventually drilled on.  Once drilling occurs and they locate oil and/or gas, you will be paid for your proportionate share of the income.  This income from the oil and gas production comes in the form of a royalty check.   These royalty checks are the benefit you receive for holding onto your mineral rights.   Once the royalties are being produced, you’ll simply get a check in the mail each month.   Your checks will slowly decline over time until eventually you no longer receive checks because there isn’t enough production.

The Case for Selling Mineral Rights

There are a large number of people who would tell you that you should never sell mineral rights.  This is bad advice!

It’s important to understand that selling mineral rights depends on your personal situation.   The decision to sell mineral rights ultimately comes down to many different factors.  The factors below are legitimate reasons why many mineral owners are deciding to go against the antiquated advice to never sell mineral rights.

Here are some of the benefits of selling mineral rights, which are also some of the most common reasons people decide to sell mineral rights:

  • Diversification:  If the value of your oil and gas mineral rights is greater than 5% of your net worth, we recommend selling.  Why?  Mineral rights are not diversified.  The market value can change drastically based on the price of oil and many other factors.   Most mineral owners have ownership concentrated in one area.  If that area goes down significantly in value, so does your net worth.  You would be much better off selling the mineral rights and buying a total market ETF like VTSAX which will give you broad diversification and an average 1.75% dividend yield.
  • Control:  If you own a rental property or you have stocks, you control what happens with these assets.  For your rental property you can raise rents, update the rental, change management, pick quality tenants, etc..  For your stocks you can pick highly diversified ETF funds and if you want to sell, it can be done in literally seconds.   When you own mineral rights you have zero control over what happens.  When leasing mineral rights you simply have to wait until you get approached.  After leasing, the oil and gas operator determines whether or not to drill. You have no control over the revenue being produced or when that revenue is produced.
  • Taxes:  One thing that a lot of mineral owners fail to take into account is their tax situation.  If you are in a high tax bracket (or even if you aren’t), your mineral rights are taxed as ordinary income and taxed at your highest marginal tax rate.   Let’s assume you are going to collect $100,000 in royalty income.  At a 40% tax rate (state taxes + federal taxes), you are going to pay over $40,000 in income taxes.   Now, let’s assume that you inherited mineral rights when the price of oil was $50/barrel and that today the price of oil is $60/barrel.  Your basis in the inherited mineral rights would be $83,333, meaning you would only show a taxable long term capital gain of $16,667.   This means you would only pay taxes of 20% on $16,667 or $3,333 in taxes due.  Would you rather pay taxes of $3,333 or $40,000 on $100,000 in income?  This isn’t even taking into account the time value of money.   Our tax article provides a more in depth explanation to determine your basis in inherited mineral rights.  You should also consult with a tax accountant before making any decisions.
  • Timing:  Many mineral owners sell mineral rights simply because they don’t want to wait years to see if any drilling occurs.   The process of leasing your mineral rights and then waiting for drilling to occur can take a minimum of 5+ years and that’s if things are going quickly.   If you don’t want to hold onto the property for 10+ years to see what happens selling mineral rights make sense.
  • Gamble:  Holding onto your mineral rights can be a gamble.  Some people hold onto their property for literally decades and nothing ever happens even after they have been leased multiple times.   There is no assurance any drilling will take place even after you are leased.  In addition, the value of the royalties could turn out to be less than expected.  You could spend years waiting for drilling to occur and it either never happens or produces very small royalties.
  • Retirement: A lot of mineral owners choose to sell during retirement.  Many retirees decide to sell to avoid paying taxes each year and to put some cash in the bank.  In addition, the sale of mineral rights converts the property into cash which makes estate planning significantly easier.
  • Financial Need:  There are many individuals who find themselves in a financial situation where they need to sell.  They might be losing their home or have unforeseen medical bills comes up.  Regardless of the reason, selling mineral rights to meet this short term obligation is never a bad decision.  Losing your home and letting your credit score go down the toilet doesn’t make sense if you own mineral rights.  It’s better to sell mineral rights and help meet that need.

Long Term Outlook for Oil and Gas

Putting politics aside, the long term outlook for oil and gas is uncertain.   As the world turns towards renewable energy, demand for oil and gas is likely to fall as alternative sources of energy replace them.   The question is when?

We believe the that oil and gas will continue to be dominate source of energy over the next couple of decades.   However, at some point in the future other technologies will take over.  Whether that’s wind, solar, nuclear, a combination of these technologies, or something we don’t even know about yet is impossible to know.  What we do know is that oil and gas will not always be the primary source of energy.

Many mineral owners have held their mineral rights for decades because the oil and gas must be used at some point right?  In 1950, we couldn’t have imagined a world where oil and gas didn’t provide all of our energy needs.  With the introduction of new technologies and a shift towards more environmental friendly energy solutions, that way of thinking is shifting.

You may find yourself holding onto mineral rights in 20 years that are worth substantially less than they might be worth today if a new form of energy starts to take over.  By the time you realize that form of energy is making mineral rights obsolete, it is likely too late.

Whether you are agree or not, if you own mineral rights you should be keeping a very close eye on new energy sources.

Your personal decision

Deciding whether to sell mineral rights or hold onto them is a difficult question.  If you find yourself conflicted over whether to sell mineral rights or hold onto them, remember that it’s your decision.   Every person has unique things going on in their life.  Every person has to make the decision that will best benefit their family.

Contact US Mineral Exchange:

If you have questions about your mineral rights, we’re here to help!  We speak with mineral owners every day and we look forward to hearing from you.  Please don’t hesitate to fill out the form below with any questions and our friendly team will respond quickly.

Free Consultation

Free Consultation

Your Name

Your Email

Phone

Average amount you receive each month:

Is the property leased?:

Do you have any offers?:

How did you hear about us?:

If you have check stubs, lease agreements, or offers, please upload those documents here(max 20 Mb):

Tell us a little about your property and what you hope to accomplish? Please include state and county of property.

Common Questions

The more information you can provide about your property the better!  We can give you a better idea about the value of selling mineral rights if you provide more information.  The most important thing we need is for you to answer the questions and provide your state and county.

If you have the required documents to list, providing those is extremely helpful!

Absolutely not!  When you inquire at US Mineral Exchange we will not be putting any pressure on you to sell.  We will help answer any questions you have whether you are interested in selling or not.

We typically respond to inquiries in less than 12 hours and usually within hours of submitting the contact form. At US Mineral Exchange our goal is to be available to mineral owners as a resource so we pride ourselves on quickly replying and communicating with mineral owners.

At US Mineral Exchange, we take privacy very seriously. We will NEVER sell your information or use it without your consent. When you send us documentation or tell us about your property, that information does not go outside our company without your consent. Even when you list a property for sale on our website, we strictly control who has access to the information about your listing so that only legitimate buyers will be able to see property details.

Many mineral owners make the mistake of getting an offer and quickly selling.   They then accept an offer far below market value because they felt pressure to sell.   There is nearly always a better price available.

We have two types of listings available to help you sell mineral rights for the best price:

Auction Listing – Our auction listings are for just 7 to 14 days.  If you have an offer in hand you are seriously considering, an auction listing is a quick way to get a better offer and ensure a smooth closing process.  Learn more about our auction listings.

Standard Listing – Our standard listings run for 30 days.  These listings are ideal if you don’t have an offer in hand or you are not in a rush to sell.  Learn more about our standard listings.

The reason that so many mineral owners decide to sell mineral rights at US Mineral Exchange is access to our large network of mineral rights buyers. Our goal is to help you get top dollar for selling mineral rights by getting your property in front of a huge audience of buyers. This allows buyers to compete against one another which ensures you get fair market value for selling mineral rights.

There are absolutely no cost to list your property.  When you locate a buyer by listing your property with us, we are paid a commission directly by the buyers closing agent. This means you never have any out of pocket expenses ever.  We only get paid if we can get you a better price than the current offer you have in hand.

FREE GUIDE

Download our free mineral rights guide now!  Learn more about your mineral rights.

DOWNLOAD

Blog Categories

Client Reviews

Linda Baldwin
15:04 17 Jul 20
Selling oil and mineral rights is not a common practice, or at least not for us. We went from "how on earth will we do this and do it right" to a very successful sale in record time. I am so happy that we found US Mineral Exchange. From the first phone call they were professional, answered all of my questions, and walked me through every step of the process with calm professionalism, and brought a price exceeding our expectations. From a seller's perspective, it could not have gone better! I wholeheartedly recommend US Mineral Exchange and gladly serve as a reference.read more
Beau Bostick
19:07 15 Jul 20
Great company just be careful who you sell to Iron Horse royalty out of Austin Texas and Garrett Merket very dishonest company. But after learning he was connected with a politician . I am not surprised
Bryan Austin
18:13 13 Jul 20
Terra was amazing in assisting me in selling my late fathers royalties. She answered all of my questions and made the process smooth as butter! Thank you!
Nicole Garcia
20:48 12 Jun 20
I contacted US Mineral Exchange in hopes to sell my families old mineral rights. Though the claims were too small for their business to sell they had great information for me and my situation. Highly recommend this company!
David Johnsen
18:06 08 May 20
US Mineral has been very helpful, leading us through all the steps in selling two different royalties. We gave them plenty of problems to work us through and they were always more than helpful and kind.
Donna Ware
18:02 23 Apr 20
My husband William Ware acquired Mineral Rights through his late Grandmother. We worked with Terra at US Mineral Exchange to begin the decisions to sell our rights. She responded to every question, even ones that to her were probably silly, she did it professionally and with kindness. When it came time to decide if we wanted to take the offer we received from a buyer, she didn't pressure us but gave us educated advise. I can't recommend this company enough!read more
Charles Clark
17:49 18 Mar 20
To Tara Castagna: Thank you very much for helping me thru the selling process of my mineral rights. Your excellent customer service and attention to detail made the process very easy. Your research of the history and records of my rights was extremely helpful in completing this project. Again, thank you for the very professional service. Conley Lawread more
John Parkhurst
20:01 16 Mar 20
I used US Mineral Exchange to sell my mineral rights in Colorado. I dealt with Terra and she was a real champ at follow-up and advise. She was extremely friendly and responsive to any questions I had. I highly recommend any individual that is considering selling their rights would be well satisfied for their customer service, experience, and guidance. My experience was totally hassle free. I highly recommend their service!read more
John Parkhurst
20:01 16 Mar 20
I used US Mineral Exchange to sell my mineral rights in Colorado. I dealt with Terra and she was a real champ at follow-up and advise. She was extremely friendly and responsive to any questions I had. I highly recommend any individual that is considering selling their rights would be well satisfied for their customer service, experience, and guidance. My experience was totally hassle free. I highly recommend their service!read more
Kenneth Wick
18:34 16 Mar 20
I obtained minerals through an inheritance and I knew they were in a area of interest. I contacted and listed with US Mineral Exchange. The good folks at USME found a buyer and the process of selling my minerals was done professionally and without a hitch. The support from Terra and Garrett was most kind and helpful throughout the entire process. I will gladly recommend their services.read more
Pearson Ferguson
16:58 03 Mar 20
Great people. Smooth process. Quick closing. Highly recommend. US Mineral Exchange also got me a fair value when other companies were trying to lowball me. I will use them again if the need ever arises.
Jack Roberts
16:49 21 Dec 19
I inherited mineral rights that have been in the family for decades. I enjoyed the monthly income but remained mostly ignorant of the whole oil/gas industry. Out of the blue I got an unsolicited offer to buy them which seemed an attractive option I had never looked into. I immediately ended up "down the rabbit hole" of how confusing this would be. In my on-line search for information I found US Mineral Exchange. After careful evaluation of the whole situation I engaged them as my broker, to list my minerals for sale. They helped me settle on a buyer, and they negotiated a purchase agreement that protected my interests better than I ever could have done on my own. During all the complicated and uncertain parts of closing the deal, I felt assured that Garrett and Eric and Terra were looking out for me and keeping me informed of the progress. The deal is now closed, the money is in the bank! I'm confident I got top dollar for my minerals, and having experienced industry professionals on my side kept me from worrying through the entire process. I am so glad I hired US Mineral Exchange.read more
Duane Cole
22:00 20 Dec 19
After some research on how to sell the family mineral rights in North Dakota I was impressed with the US Mineral Exchange website. An initial contact with Terra got me started gathering documents to use to post the sale on the website. About one week after posting, Garrett suggested we request a best and final offer. Within a couple of days I had a final offer and we completed the deal, after exchanging paperwork, which took a couple more days. The service was fast, excellent and beyond my expectations. We received more for the rights than an offer I had received and more than I had expected. Terra and Garrett at the US Mineral Exchange were great at walking me through the process, answering my questions, and guiding me through the paperwork. I would recommend the US Mineral Exchange to anyone who is interested in selling their mineral rights.read more
Darrin Tur