6 Things Mineral & Royalty Owners in New Mexico Need to Know Before Selling Their Rights
Owning mineral rights in New Mexico can be a valuable asset, but selling those rights requires careful planning and an understanding of the unique issues in the state. If you are a mineral or royalty owner in New Mexico, especially in areas like Lea County and Eddy County, there are several key factors you need to know before making a decision.
1. Understanding Mineral Rights in New Mexico
Mineral rights give you ownership of the resources beneath the surface, including oil, natural gas, and other valuable minerals. In New Mexico, mineral rights are often separated from surface rights, meaning you may own the subsurface rights but not the land itself. This makes it crucial to understand the difference between mineral rights and royalty interests before selling.
2. Federal Lands and Leasing Rules
A significant portion of New Mexico mineral rights are located on federal lands, particularly in southeastern New Mexico where oil and gas development is booming. When minerals are under federal ownership, strict leasing and permitting processes must be followed. This can affect both the value of mineral rights and the time it takes for development to occur.
3. Potash Mining Considerations
New Mexico is one of the leading producers of potash, a critical mineral used in fertilizer production. In areas where potash mining occurs—particularly around Carlsbad—there may be conflicts between potash and oil and gas development. The federal government has designated Potash Enclave Areas, where oil and gas drilling is restricted to protect potash reserves. This means if your minerals are in these areas, the value and development potential of your rights may be limited.
4. Drilling Challenges in Lea and Eddy Counties
While Lea County and Eddy County are among the most active oil-producing counties in the U.S., they also come with challenges. Extensive salt deposits and historical salt mining create geological difficulties for drilling operations. This can increase development costs and affect whether oil companies are willing to lease or drill on certain tracts. As a result, mineral owners in these counties should be aware that their minerals may not hold the same value as those in less complicated areas.
5. Timing and Market Conditions Matter
The value of mineral rights in New Mexico is tied closely to oil and gas market prices, drilling activity, and operator demand. Selling when oil prices are high or when your minerals are in a hot development zone can bring a higher offer. On the other hand, downturns in the energy market may significantly reduce what buyers are willing to pay.
6. Steps Before Selling Mineral Rights
Before selling, every mineral and royalty owner in New Mexico should:
- Work with a trusted mineral and royalty professional, like a Landman, who is an expert on the valuation of mineral rights in New Mexico
- Understand whether your rights are producing or non-producing (hint: are you receiving monthly royalties? If yes, they are producing!)
- Gather any existing oil and gas leases, deeds, conveyance documents, royalty statements and offer letters to help your professional understand the full picture of your assets.
(Don’t have much? It’s ok! We can still help.)
Never accept the first (and only) offer from a mineral rights buyer! Plus, how do you know they are legit? (Read our blog to help you find out.)
Venergy is well known in the industry and we have the right contacts with reputable mineral buyers. Going at it alone without asking for professional guidance could result in a potential loss of thousands, or even hundreds of thousands of dollars.
Final Thoughts
Selling mineral rights in New Mexico is not a simple transaction. With the complexities of federal land regulations, potash mining restrictions, and drilling challenges in Lea and Eddy Counties, it is essential to be fully informed before making a decision. By understanding these factors and carefully weighing your options, you can ensure you get the best possible outcome when selling your rights.
Frequently Asked Questions (FAQ)
Leasing mineral rights allows you to maintain ownership while receiving royalty payments when production occurs. Selling provides an immediate lump sum but means you give up future income potential. This can be a very personal decision and depends heavily on many different factors, including, but not limited to your financial goals, the location of your minerals, and current oil & gas activity.
Minerals under federal land are subject to stricter regulations, which can delay development. This often lowers the immediate value of the rights compared to private land minerals, but long-term demand may still be strong in oil-rich areas.
The federal government restricts oil and gas drilling in designated Potash Enclave Areas to protect potash reserves near Carlsbad. If your mineral rights are in these zones, it may limit oil & gas development potential, reducing overall value.
Geological issues from salt deposits and salt mining make drilling more challenging and expensive. While these counties are highly active for oil production, not every tract is viable for development due to these complications.
The value depends on many factors like location, the stage of development your interests are in, current oil and gas prices, and operator interest, but there are many more that matter. A professional Landman who has close relationships with mineral rights buyers to find out your mineral rights value is the best way to sell mineral rights in New Mexico safely.
If you’re considering selling your mineral or royalty interests in New Mexico, make sure you do your research, seek professional advice, and understand how unique local conditions may affect your asset’s value.
Schedule your consultation with us today, we’re here to help.
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