Fracking And How It Affects Mineral Rights Owners
Fracking: Risks / Rewards For Mineral Rights Owners And Royalty Owners
This page is about the monetary risk to those who own mineral rights and royalties in oil and gas producing states regarding the possible ban of fracking an oil or gas well.
The process of fracking a well is a controversial subject these days. Fracking is short for fracturing. Oil and gas are not produced from literal pools or lakes of oil beneath the ground but from porous and permeable rock formations which hold oil or natural gas like a super hard, inflexible sponge. "Conventional" reservoirs are those which are permeable enough to give up oil and/or gas without a frack / fracture stimulation; primarily, these are porous and permeable sandstone, limestone or dolomite formations. Some rock formations which do, in fact, hold oil and gas are so "tight," meaning impermeable, that they will not give up (produce) commercial quantities of oil and gas. This includes "tight sands" and also shales. The fracking process injects large quantities of fluid, usually water, along with sand or other proppant, done under very high pressure with huge pump trucks. The fluid, primarily water and sand create artificial fractures in the underground reservoir rock. Once the pumping stops and all equipment is removed, the well will then flow back and start to produce oil and/or natural gas. The sand/proppant keeps the artificial fractures from closing off, which would shut off the flow of oil or gas.
Here is a video illustrating the frack process. It was produced by an oil company but appears factual.
Fracking is not new, it's been around for about seventy years, having first been used in the forties! Over one million wells have been fracked, so, it has a very long track record. And, in this writer's opinion, with very little ill effect. However, there are real concerns to mineral owners and royalty owners.
Without fracking, the modern oil and gas industry is toast! If one wanted to, more or less, shut down most modern oil and gas exploration, all that is needed is to ban fracking. Which is exactly what has been done in New York state. All of the "easy" oil and gas in North America has been found. Easy being easy to find and easy to produce -- conventional reservoirs. What is left is huge, but it must be stimulated with a frack, else, commercial production is not possible. The oil and gas industry has undergone a paradigm shift over the past several years. Heretofore, a shale formation was primarily thought of as a source rock for oil and gas. Over millions of years, oil and gas is generated from the source rock, seeping into conventional sandstone, limestone or dolomite reservoir rock, where it is easily produced. But thanks to George Mitchell and Mitchell Energy, over about twenty years, the concept of using fracking and horizontal drilling into a shale was commercialized in the Barnett shale, Fort Worth basin of Texas. Now, there are several North American shale plays which have seen a lot of drilling -- thousands of new wells, with many more to come if fracking is allowed. Some of these shale plays (some are not true shales but they are very tight and impermeable rock formations like shales) are the Barnett shale, Fayetteville shale, Haynesville shale, Bossier shale, Marcellus shale, Utica shale, Devonian shale, Niobrara shale, Monterey shale, Bakken shale, Antrim shale, Cline shale, Woodford shale, Tuscaloosa Marine shale, Eagle Ford shale, Brown Dense, Mississippi Lime and Mancos shale.
In all shale plays, the shale will contain oil and/or gas over a broad area but only the "sweet spot" areas will end up being developed. Other areas will be proved to be unprofitable. But where the sweet spots are in these shales, significant income can be produced to mineral owners and royalty owners. And, the modern oil and gas industry is extremely labor-intensive, employing hundreds of thousands of skilled, high-paying workers. Drilling a modern oil or gas well costs millions of dollars per well! Check out this video of a modern well being drilled. It shows the amazing amount of work going into drilling a well. So, economically and politically, modern oil and gas exploration is a plus.
So, since it creates a huge amount of jobs and produces a lot of money for mineral owners and royalty owners (and state coffers due to royalty payments, severance tax, sales tax and income tax), what's the rub? Environmentalists are primarily concerned about potential dangers of the frack process to the environment. They frequently cite contamination of groundwater aquifers, dangers to humans, livestock and wildlife with the chemicals used, safety concerns, and damage to the atmosphere due to the escape of methane from wellsites.
Having started my career in the oil and gas business in 1978, in this writer's opinion, the concerns are not well-founded, but I am a nature lover and somewhat of an environmentalist myself, so, I am giving an honest perspective. There are definitely environmental costs associated with oil and gas exploration. I, especially, am concerned about the destruction of habitat when they build the roads and drillsites, but, if they reclaim it when they abandon the sites, this can be "fixed."
The biggest problem is the planet has too many people. That's it in a nutshell but what are we going to do, ban having babies? (It certainly might come to that some day!) The world uses an enormous amount of fossil fuels to run itself and due to a huge part of the planet now "coming of age" into the modern, industrialized world, it's only going to get worse. Fossil fuels provide an enormous amount of bang for the buck. Can you imagine the energy produced from one gallon of gasoline? Think of pushing a 4,000 lb. car down the road at 60 mph. Wow! For the cost of one gallon of gas, one can do something amazing! Think of what you'd give in 1800 to be able to do that! (And that is what the poorer countries are now experiencing... welcome to the modern world.) Yes, electric cars can move us around but for the near future, gasoline will remain King. But if technology could deliver an efficient, affordable electric car (or other car powered by something other than gasoline or natural gas), wow, oil and gas exploration would nosedive. Lots of cars out there! And you can bet that manufacturers are working fast as they can to produce such a vehicle!
However, environmentalists are serious! I don't have all the answers, that's for sure but I can tell you that the risk of political intervention is real. I have seen it more than once in my lifetime. But this anti-fracking crowd is very vocal and many people feel that the current administration is anti-oil industry. I refrain from political commentary. But to see how an anti-fracking stance has reached the bigtime, see this recent video -- David Letterman on Fracking: "We're screwed." It's satire, but many people latch on to such commentary as gospel.
There are even anti-fracking films, including one major Hollywood release. So, the risk to fracking is real!
By the way, there have been some claims that fracking has caused earthquakes. I am not aware of this having been proved; I would think it is unlikely, but, possible. So, it just adds more uncertainty and adds to the risk all of us mineral owners take by hanging on and NOT selling mineral rights. I own mineral rights and I would be really sick if they banned fracking because my mineral rights value would plummet!
What's A Mineral Owner To Do?
So, if one owns mineral rights or royalty rights, what are your options? Option #1 is to do nothing and assume that modern oil and gas exploration, heavily dependent on fracking, will continue. And that your mineral rights will get developed before you die, producing royalties (mailbox money). Option #2 is to remove all risk, selling mineral rights for a lump sum cash settlement -- to take the money and run. And, I can understand that way of thinking. Even though I remain "okay with it" today (fracking and holding on to mineral rights), tomorrow I may change my mind. I have sold before and I just might sell again. My thinking can sometimes reach the point that it's not worth the risk, I should just cash out and enjoy the sure money. It's an individual decision, but nothing, NOTHIING takes the place of cold, hard cash. That totally removes all risk. There are numerous risks of NOT taking a lump sum cash offer to sell mineral rights and the potential ban of fracking is just one of them. For more info, see this site.
Good luck to you! As of today, we're still buying!
Contact Us For Selling Mineral Rights
We have backers who have big bucks and as of right now, we are still in buying mode. We spread risk by buying mineral rights and royalties across many states and many oil and gas plays so that we don't just own one property, we own many! If any one of them turns out a bad investment, we're still okay because others take up the slack.
We are happy to work with you on a lump sum settlement for your mineral rights and royalties. We make it easy on you, and pay closing costs. Please call the number below and speak with Bill, an easy-to-work-with expert who has over 35 years experience and has bought thousands of acres and has paid out many millions of dollars to selling mineral owners:
(Ask for Bill)
You may also fill out the form below. If you do so, please describe the mineral rights or royalty rights that you have so that we can properly determine your lump sum payment.