Some mineral owners in Colorado are ticked off.
Facing several looming local initiatives to ban fracking in some of the most oil-rich parts of the state, those who would benefit most, the royalty owners, are out right upset.
“We have valuable minerals in the Niobrara that may be worth some money -- a lot of money,” said Bill Peltier, speaking of rights in an oil shale formation that his family has held for five generations. “They should pay me off for those mineral rights.” Peltier was quoted recently in a Bloomberg article covering the story.
This brings up a valid point, one that is also has rights holders in New York upset over the state-wide restriction on drilling that has been in place since 2008. In most states, mineral rights holders have priority of surface rights holders. In other words, if you bought a beautiful Colorado ranch, with pristine mountain vistas and a private stream caulk full of trout, but you didn’t hold the mineral rights below the surface of that beautiful estate, theoretically Big Bad Oil Company, Inc. could lease the mineral rights from the person or entity who held them, and you would be notified that drilling would begin on the back 40 in about a month. You would then have drilling on your land, and you would be compensated for it while it was going on, but you would not receive the wonderful on-going income stream of the royalty owner. Most State Supreme Courts uphold that priority.
But if the county your ranch was in banned fracking, then the mineral owner wouldn’t have access to monetize his yet-to-be-developed asset, and for that, a growing number of mineral rights owners are demanding to be compensated.
One last point: Owning mineral rights is one of the best vehicles for on-going passive income. But they are hard to come by, especially now in this unprecedented boom. One of the sponsors of Powering America Radio is Crude Energy and they have special royalty funds that allows accredited investors to own royalties. For more information, go to www.cruderoyalties.com and fill out the contact box. Someone will get back with you to determine if it is something you should consider for your portfolio.
Powering America is heard daily on the Wall Street Business Network at 4:00 Eastern and is co-sponsored by Crude Energy, LLC and Breitling Energy Corporation. Podcasts of the shows are available by following this link to iTunes.