Oil Lease

[zydeco2go]

Hi, Im apprasing a farmstead that has an oil lease on the property. In my market I have no data to support a positive or negative adjustment. Does anyone have any experience in such a property, or any market evidence that would support an adjustment. The lease states they need to be 200' from any building.

Thanks

 

[Meandering]

Message Terrel.

he used to teach those classes.

.

 

[Russ Kitzberger]

Will depend on if you are appraising the fee simple interest or the leased fee.

 

[Restrain]

Did a bunch in Texas And still have land under lease there. First, it depends on the overall lease. Oil well leases are generally smaller, while gas well leases are usually several hundred acres. You need to find out if it is producing or not. If it has been leased but nothing happening, comment and go on, just speculation at this point on the lessor. Second if it is producing , somewhere the well already exists, and if you can’t see it, don’t worry about the proximity issue because they won’t drill next door to the buildings. You cannot apply a ‘they might drill by the buildings’ guess at this point. Now, if they own the leased minerals (not unusual for the minerals to be severed), and it is producing, you can capitalize the income over a reasonable holding time.

Do some more research and then get with Terrel as to what he would suggest. Good luck.

 

[Terrel L. Shields]

Im apprasing a farmstead that has an oil lease on the property.

In Minnesota? Where is the oil? I've never heard of any wells or production there. So is it a real lease, or is it someone has reserved the mineral rights as a condition of sale in the past.

First, are you saying someone owns an oil and gas LEASE on the property? Are there any wells or pump jacks?

Or are you asking if the property has reserved the oil and gas (mineral rights) and it is no longer part of the fee simple?

Unless you have some oil actually being drilled or produced. I would caveat it away. First, say there is no oil drilling activity. A lease would be a one off by someone who is either a local who does not know what they are doing, or some ex-Texan that thinks oil is under every piece of ground in America. So figure out what they own. If they own only the surface, then * the Fee Simple box and explain they have fee in surface estate only. If there is a real oil and gas LEASE, then say the mineral rights are a leased fee estate but the surface is fee in surface. Note that if the owner does not control the minerals (either not having them or leased out) then the lessee can enter and egress the property.

Note that it is unlikely to change the value of the surface. PM me a copy of documents that are telling you and I can explain exactly what it is.

Mineral Right Tips for Appraisers | Terrel Shields, Certified General Appraiser - Mineral Appraisals, Oil and Gas Specialist