OGM Rights: What are they?
OGM rights, also known as oil and gas mineral rights, refer to the ownership rights of the minerals found beneath the surface of a property, specifically including oil and gas. These rights grant the mineral owner the authority to explore, extract, and profit from the minerals. Understanding how OGM rights work, what people typically do with them, and how they are valued is crucial for anyone involved in the oil and gas industry or considering purchasing or selling these rights.
OGM rights are separate from surface rights, which pertain to the ownership and use of the land above the surface. In some cases, the same person or entity may own both OGM and surface rights, while in other cases, the subsurface rights may be severed from the surface owner and owned by different a individual, company, or entity. This separation of mineral rights from surface rights allows for the possibility of multiple owners with varying interests.
How Does Oil and Gas Differ from Other Minerals
Oil and Gas differ from other minerals in many ways. These differences include how it is formed, the state in which is useful for consumption, and it’s importance to economic markets. Many of these factors contribute to the significance of oil and gas to modern society, which may explain why OGM rights can sometimes command it’s own category.
Formation and Composition
Oil and gas are hydrocarbons, which means they are organic substances formed from the remains of ancient plants and animals buried and subjected to high pressure and heat over millions of years. Other sub-surface minerals, on the other hand, can be composed of various elements and compounds, such as metals (e.g., copper, gold, iron), non-metallic minerals (e.g., gypsum, salt, limestone), and gemstones (e.g., diamonds, emeralds).
State of Matter
Oil is typically found in liquid form, while natural gas exists in gaseous form. Both oil and gas are fluid, making their extraction and transportation different from solid minerals, which are usually mined.
Exploration and Extraction Techniques
Finding oil and gas reserves involves geophysical surveys and drilling exploration wells, often at considerable depths below the surface. In contrast, other sub-surface minerals are usually identified through geological surveys and can be mined through various methods like open-pit mining, underground mining, or quarrying.
Economic Importance
Oil and gas have been the primary sources of energy for various industries and transportation for decades. They are crucial to the global economy and have significant geopolitical implications. On the other hand, other sub-surface minerals play critical roles in industrial processes, construction, electronics, jewelry, and more, but they may not have the same level of widespread economic and strategic importance as oil and gas.
Environmental Impact
The extraction, refining, and combustion of oil and gas products have raised concerns due to their significant impact on the environment, including greenhouse gas emissions and pollution. While mining for other sub-surface minerals can also have environmental consequences, they might differ in terms of the specific nature and scale of their impacts.
Ownership and Legal Framework
The ownership and legal regulations surrounding oil and gas reserves can be complex and often involve agreements between governments and private companies. In contrast, other sub-surface minerals may have different legal frameworks and ownership arrangements, depending on the specific country and its mining regulations.
In summary, oil and gas are distinct from other sub-surface minerals in their formation, composition, state of matter, extraction techniques, economic importance, environmental impact, and legal considerations. Their significance as primary sources of energy and the challenges associated with their extraction and use have made them central to global economies and energy policies.
How do OGM Rights work?
To acquire OGM rights, an individual or company can either purchase them outright or obtain them through a lease agreement with the property owner. Leases typically grant the lessee the right to explore and extract minerals for a specified period, while the lessor receives financial compensation, usually in the form of royalties or lease bonuses.
Once a party holds OGM rights, they can engage in various activities related to the exploration and extraction of minerals. This includes seismic testing, drilling wells, and extracting oil and gas reserves. The rights holder may choose to conduct these activities themselves or enter into agreements with oil and gas companies to carry out the operations on their behalf.
The Value of OGM Rights
The value of OGM rights depends on several factors, including the geological potential of the property, current market conditions, and the terms of the lease agreement. Valuing OGM rights can be complex and requires expertise in geology, engineering, and financial analysis. Companies specializing in mineral rights evaluations help determine the potential value of these rights, considering factors such as estimated reserves, extraction costs, and projected oil and gas prices.
Most people who own OGM rights choose to monetize them by leasing the rights to oil and gas companies. The lease agreement typically provides the rights holder with a share of the revenue generated from oil and gas production, known as royalties. Royalties are usually calculated as a percentage of the production value, ranging from 12.5% to 25% depending on various factors such as the negotiating power of the parties involved and local regulations.
Lease bonuses can also be a source of income for OGM rights holders. A lease bonus is a lump sum payment made by the lessee to the lessor upon signing the lease agreement. The amount of the bonus depends on factors such as the desirability of the property, the current market conditions, and the negotiating skills of the lessor.
Apart from leasing, some OGM rights holders may choose to sell their rights outright. Selling can provide an immediate lump sum payment, which may be desirable for individuals or companies in need of liquidity or who prefer to avoid the risks and complexities associated with oil and gas operations.
In summary, OGM rights are ownership rights to the minerals beneath the surface of a property, specifically oil and gas. These rights can be acquired through purchase or lease agreements and allow the holder to explore, extract, and profit from the minerals. OGM rights are typically monetized through leasing, where the rights holder receives royalties and lease bonuses, or through outright sales. The value of OGM rights depends on various factors and can be assessed by experts in the field.
What can you do with OGM Rights?
Oil and Gas Mineral rights refer to the legal rights granted to individuals or entities to explore, extract, and utilize oil, gas, and minerals found beneath a particular piece of land or property. For mineral owners, these rights can be bought, sold, leased, or transferred to others for various purposes. Here are some of the different things that can be done with oil and gas mineral rights:
Exploration
Mineral rights holders have the authority to explore the land for potential oil, gas, or mineral deposits. In these cases, it’s important for there to be an agreement between the mineral owner and the individual or entity that retains surface land ownership. This typically involves conducting geophysical surveys, drilling test wells, and conducting other geological studies to assess the potential underground resources that can be unlocked in the mineral search.
Extraction
Oil and gas mineral rights allow the holder to extract and produce oil, gas, or minerals from the land. Extraction can involve mining and drilling activity, establishing mining operations, and implementing production techniques to recover the resources. In some cases, especially if a gas company is involved, additional research may be conducted to uncover the most efficient or effective way to extract the minerals.
Leasing
Mineral rights can be leased to companies or individuals. When an oil and gas lease is established, the rights holder grants permission to a lessee to explore and extract resources from the land in exchange for royalties or other forms of compensation. Leasing deals can be extremely complex involving a lawyer or local attorney, extensive due diligence, and other unique deal structuring to protect the mineral owner, land owner, and the company.
Royalties
If the mineral rights owner does not wish to participate actively in exploration and production, they can receive royalties from companies that extract and produce resources from their land. Royalties are typically a percentage of the value of the resources extracted. Mineral property owners are often paid money as compensation for using the OGM rights.
Selling
Mineral rights can be sold separately from land rights and sold outright to another party. This can happen when an individual has inherited rights, a property conveyance has occurred (such as title), or some other form of real estate transfer involving a new owner. This transfer of ownership means that the buyer assumes all the rights and responsibilities associated with exploring, extracting, and utilizing the resources. The seller is thus relieved of any responsibility associated with the property. The process may be similar to what would take place when an individual would purchase land.
Development
OGM rights holders may participate in the development of the resources on their land by investing in infrastructure, production facilities, and other necessary equipment. Landowners have to agree to such an arrangement, but these infrastructure developments can be lucrative in connection with a large company looking from profit from the extraction of minerals.
Joint Ventures
OGM rights holders can enter into joint ventures with other companies or individuals to pool resources, expertise, and investment for exploration and production activities. These organizations may buy land, consult with an attorney, negotiate for property rights, and solicit surface rights owners in search of a profit from mineral rights.
Conservation and Preservation
OGM rights holders can choose to conserve and preserve the natural resources beneath their land by not exploiting them. This may be done for environmental, cultural, or personal reasons. With concerns regarding the survival of the planet and the impact that fossil fuel may have on the environment, some owners chose to simply sit on the resources, or do other things with the land like, raise livestock, grow crops, or other conservation focused activities.
Negotiating Surface Use Agreements
In cases where surface and mineral rights are owned by different parties, the mineral rights owner may negotiate surface use agreements with the landowner to gain access to the land for exploration and extraction activities.
It’s important to note that the specific rights and permissions granted by mineral rights can vary based on the location, jurisdiction, and the terms of the lease or contract between parties involved. Additionally, government regulations and environmental considerations often play a significant role in determining how OGM rights can be utilized.
Contact a Mineral Rights Professional Today!
At The Mineral Auction, our team is dedicated to helping mineral owners understand their mineral rights and determine when they can do with those rights to serve their interests. We are experienced in helping owners find buyers, negotiating terms, and ensuring that the process goes smoothly. You can submit a message through our contact form, or you can can call us at (512) 698-2802.
