For a property owner stuck with an older oil and gas lease that predated the recent shale leasing craze, this may sound like an attractive proposition. The amounts offered per acre may rival the bonus payments being offered by shale drillers for un-leased property.

However, for many property owners, this can be a very bad deal. Here are some issues to keep in mind.

1.      This involves a sale and not a lease. With the sale goes all of the seller's rights to future royalties. If the property is developed for shale production, those royalties (even at nominal percentages) could quickly far exceed the per-acre payments being offered.

2.      The landowner will likely lose whatever protection was given by an existing lease. The lessor's rights under that lease would become rights enjoyed by the buyer of the mineral rights. Provisions concerning surface use, set-backs, environmental protections and the like might be jeopardized or lost to the selling landowner.

3.      The landowner could lose control of the property’s surface rights. It is implied by law that the owner of severed mineral rights has the right to surface access as needed to access the minerals.

4.      The remaining value of the surface of a property could be significantly jeopardized.  The sale of mineral rights under some circumstances could render the surface unmarketable.

5.      Complex tax issues arise with placing a value on severed mineral rights.  The rights severed and sold should be appraised before the transaction proceeds to accurately determine the amount of taxable gain.

As is true with any document affecting mineral and oil and gas rights, a property owner definitely should not agree to an offer to purchase mineral rights or sign any documents involved without thorough understanding of the transaction and what the documents mean.

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Alan D. Wenger is an attorney in Youngstown, Ohio. His practice areas include oil and gas law, public utilities law, labor and employment law, land use law, environmental law, construction law and school law.