Notice the absence of Ter
actually i am trying to croak (literally) from a sinus infection and its been most entertaining to read the posts.
Mineral rights are part of fee simple. If there is no reservation in a deed nor a seperate mineral deed, then the mineral right transfers with the fee simple. If the mineral rights are 'severed', then you are not appraising "fee simple". You are appraising "Fee in Surface." Learn that term. The X on the 1004 ain't right. In the West its rare to find intact minerals. The U. S. kept many mineral rights. In Texas and Oklahoma, other states, where a boom occurred in the 30's impoverished farmers sold off their minerals to pay bills or retained the mineral right when they sold the farm due to production, etc.
If the deed unequivocally states no reservations of record, then you likely have intact mineral rights. In Salina, those mineral rights will be worth pretty much nothing but about 20 miles west there is some limited production and some leasing in the coal trend which angles up from Muskogee area to SE Kansas all the away to KC and even parts of W. Missouri. Typically, they lease for $50 a 3-5 year term and the old oil field saw is that the mineral right would be worth 3 x the lease bonus. If production is established then it is said to be held by production and the lease does not expire until the oil or gas plays out. Coal and other similar hard minerals are leased a little differently. The lessee gets a share of the gas (usually 12.5 - 20%) whereas coal is paid by the ton.
For most appraisers the issue of a severed mineral under the subject is a dual sword. One is that the owner has lost control of the mineral right and therefore, cannot prevent the mineral owner from "enjoying" his mineral right. That is, they can drill on you and you cannot stop them. A bad development such as a noisy pumpjack could have a negative effect upon the homeowner. Where it simply is out in an open pasture, you likely are not going to have a problem. If the mineral is intact, then they may contribute value to the property. The conundrum is to determine how much does it contribute to the property. The market which sells oil and gas minerals (industry pros) is not the same market buying land tracts for recreation, farming or residential uses. Thus you need to compare apples to apples and use comparables with fee simple intact to compare to tracts with fee simple intact.
Mineral rights are real property rights. They are not easements. They are not personal property. They are not intangibles. They are appraised under Std. 1, 2 as severed. They are included in the fee simple value. Disclaiming them in the report reduces the estate which you are appraising. For most mortgage lending disavowing mineral value is acceptable, but for an estate, a condemnation case, or gifting to the IRS, the fee simple is required to be appraised in toto.
The profundity lay in the details, but the absurdity is right on the surface.-said about the "efficient market hypothesis" - Bonner, 2003
