5 Common Myths About Mineral Rights—Debunked
Howdy folks! Welcome back!
Do you believe some of the most common myths about mineral rights? If you own or are thinking about owning mineral rights, it’s easy to be misled by a few widespread misconceptions. Here’s the reality behind these myths, plus a new way to make your mineral rights work for you without selling them.
Myth #5: Oil and Gas Royalties Last Forever
Many people assume oil and gas royalties will keep paying for a long time. The truth? Production follows a sharp decline curve. Most shale wells in the U.S. produce 70-80% of their total output in the first two years, after which production slows significantly. So, while royalties may trickle in for years, the bulk of a well’s value is captured in the first five years.
Myth #4: Someone Could Steal Your Minerals
Mineral rights are real property, like a house or land, and are protected by strict property laws. Transfers must be in writing, notarized, and recorded with your county courthouse. This means it’s essentially impossible for someone to “take” your minerals without your knowledge and consent.
Myth #3: Always Pass Your Minerals to the Next Generation
Passing mineral rights to your heirs can seem like a good idea, but it often leads to what's called "fractionalization." As these rights are split across generations, individual ownership shares become so small they may no longer provide meaningful income. If royalties are minimal, selling might be a better option than passing along fractions that require ongoing management and tax obligations.
Myth #2: Your Minerals Are Priceless
Mineral rights certainly hold value, but it’s specific and measurable. Using engineering and statistical analysis, mineral values are calculated based on expected oil and gas production. These estimates give a clear picture of what a property is worth, removing the guesswork and providing a practical basis for decision-making.
Myth #1: Selling Your Minerals Is the Only Way to Access Their Value
Until recently, selling was the primary way to unlock mineral value. Now, Frontlands offers a Mineral Line Of Credit ™(MLOC™), a new option that’s similar to a home equity line of credit (HELOC). With an MLOC™, you can borrow against your minerals without selling them outright, allowing you to tap into their value while retaining ownership.
