For land and mineral rights’ owners in Texas, the oil boom in the state has been a blessing – when hydraulic fracturing enabled oil production within the Eagle Ford Shale in 2008, the foundation was established that has lead to many mineral rights owners becoming millionaires. In 2014, the boom has showed no signs of slowing down, and residents of Texas continue to prosper from the riches that oil has brought. As the cost of oil in the country continues to fluctuate, so, too, does the mineral rights owners’ royalties and potential royalties.
A Big Connection Between Mineral Rights’ Profits and Oil Prices
According to Bakken.com’s Daily Shale News, there’s a big connection between the price of land and the price of oil in the state of Texas. As the cost of crude oil rises, so does the cost of land; in fact, in 2012, the average cost of land was $1,981 per acre –nine percent lower than what it was in 2013, which was $2,160 per acre. In 2014, land is estimated to cost approximately $2,345 an acre, another nine percent increase.
What do increased land prices mean for mineral rights’ values?
While mineral rights and property rights for the same plot of can be split – and often are, belonging to separate individuals – they’re also often owned as a cohesive package. In other words, it’s not uncommon for the owners of land rights to also own the mineral rights associated with that land. As such, as oil prices increase and the cost of land soars, so do the value of mineral rights coupled with that land. And as oil prices increase in the state of Texas, the royalties that mineral rights’ owners can collect on oil drilled on their property is also greater, meaning more riches for mineral rights’ owners in the Eagle Ford Shale and other oil-dense areas of the state.
A Decline in the Price of Land on the Horizon
As oil prices begin to drop, many are wondering how the Texas economy, and property owners and mineral rights’ owners, will fare. In November of 2014, oil prices slid from about $100 to $75, and may continue in that direction. While the production of oil in the state is estimated to continue surging forward, how land and mineral rights’ values will be affected by the decline is unknown. Other variables factor in on this relationship such as the exportation of oil, but gas prices and property value in Texas are likely to remain conditions on one another for the foreseeable future.