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How much should mineral royalties be?

The California gas and oil businesses are complex. If you own land or mineral rights, you probably work with those who hold interests or leases in the minerals, mining rights or royalties. Normally, contracts with these individuals and companies could provide consistent value to you as an owner. However, things do not always go as smoothly as intended.

Generally speaking, you can prevent many mineral disputes by establishing sound and fair contracts at the outset of a business partnership. Here is some information about establishing lasting royalty agreements, including some typical industry conventions on pricing.

You would want to negotiate leases that included royalty rights if you owned mineral rights to a piece of property. This allows you to receive payment based on the productivity of your assets as well as their inherent or prospective value. Most royalty rights holders negotiate for somewhere between 1/8 and 1/4, but your own terms should depend on your unique situation.

Of course, the simple percentage of royalty payments is not the only issue at stake. The form of the royalties, such as in-kind or cash, also could determine the value you would be able to secure from the types of payments. In terms of disputes, due dates and interest rates for royalty payments could also come into play. The best strategy in most cases is to go through all of the possibilities and write terms of the contract to deal with them specifically.

If you are receiving royalties, you may suspect that the gas companies are not paying you your due. As discussed on NPR, there are class-action suits in progress against predatory organizations. However, this is just information. Please do not view it as legal advice.

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