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North Dakota Mineral Resource Director, Lynn Helms said 2023 was a good year for the state's oil and gas industry.

2023 a ‘good year’ for oil and gas in North Dakota

North Dakota Mineral Resource Director said 2023 was a good year for the state’s oil and gas industry.

“Prices were good,” said Lynn Helms. “And the companies were able to attract enough frack crews, to get into the mid to upper teens.”

Helms said the companies weren’t as successful with drilling crews.

“There are still workforce issues,” Helms said.

Helms said the year began with North Dakota producing just over a million barrels of oil per day. He said the hope was to get to the 1.3 million barrel mark by the end of the year. He said those final production numbers aren’t in yet.

As for next year?

“2024 looks to be slower growth,” Helms said. “But people are pretty optimistic.”

North Dakota Pipeline Authority Director Justin Kringstad echoed Helms’ comments.

“In 2023, what stands out is the month we got down to 4 percent flaring,” Kringstad said. “We’re continuing to see dedication by all sides — producers, mid-stream companies — to stay on top of this.”

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Source: Prarie Public NewsRoom

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Unlock the potential of Texas oil and gas industry with Overriding Royalty Interests (ORRI). Explore advantages, risks, and key considerations for landowners and investors in this comprehensive guide.

Overriding Royalty Interests in Texas: A Comprehensive Guide

DISCLAIMER: We are not financial advisors. The content on this website is for educational purposes only and merely cites our own personal opinions. In order to make the best financial decision that suits your own needs, you must conduct your own research and seek the advice of a licensed financial advisor if necessary. Know that all investments involve some form of risk and there is no guarantee that you will be successful in making, saving, or investing money; nor is there any guarantee that you won’t experience any loss when investing. Always remember to make smart decisions and do your own research!

Overriding royalty interests (ORRI) are a unique and valuable aspect of the oil and gas industry, particularly in a state like Texas, which has a rich history of energy production. If you’re a landowner, investor, or industry professional involved in the Texas oil and gas sector, understanding overriding royalty interests is essential. In this comprehensive guide, we will explore the world of overriding royalty interests in Texas, shedding light on what they are, how they work, their advantages and disadvantages, and the key considerations for landowners and investors.

Texas has long been synonymous with the oil and gas industry, making it a prime location for investment and ownership in this sector. Overriding royalty interests are a critical aspect of this industry, allowing landowners and investors to participate in the energy wealth of the state. In this guide, we’ll take a deep dive into overriding royalty interests in Texas, exploring their nuances, benefits, risks, and what you need to know to navigate this complex terrain.

Understanding Overriding Royalty Interests

An overriding royalty interest (ORRI) is a share of the revenue that produce from the extraction and production of minerals, such as oil and natural gas, from a specific piece of land. ORRIs are created by a royalty interest that is “overriding” the rights of the working interest owner. In simpler terms, the holder of an ORRI is entitled to a portion of the income generated from the minerals extracted from a property, regardless of whether they own the property itself.

An ORRI is typically expressed as a percentage, such as 1% or 3%, and it is calculated based on the gross proceeds from the sale of extracted minerals. This interest is often granted to someone other than the property owner, such as a geologist, drilling company, or a professional in the industry.

The Mechanics of Overriding Royalty Interests

To understand how overriding royalty interests work, consider the following scenario:

  • A landowner, say in Texas, leases their land to an oil and gas company for drilling and extraction.
  • The lease agreement specifies the terms, including royalty rates, which are typically shared between the landowner (the lessor) and the company (the lessee).
  • Let’s say the landowner and the company agree on a 20% royalty rate, meaning the landowner receives 20% of the revenue from the minerals extracted from their land.
  • Now, suppose a geologist or investor holds an overriding royalty interest of 3% on this property. This ORRI entitles them to 3% of the gross revenue from mineral sales, in addition to the landowner’s 20% royalty.
  • The remaining 77% of the revenue goes to the drilling company as the working interest.

In this way, the holder of the overriding royalty interest benefits from the minerals extracted from the land without being responsible for the operational costs or day-to-day activities involved in drilling and production.

Advantages of Overriding Royalty Interests

Overriding royalty interests offer several advantages for landowners and investors in the Texas oil and gas industry:

Passive Income Stream

Holders of ORRIs receive a steady and often passive income stream. They can enjoy financial benefits without actively participating in the operations, making ORRIs an attractive source of income for many.

Minimal Operational Responsibilities

ORRI owners are not responsible for the operational activities, expenses, or risks associated with drilling and production. This minimizes their operational involvement and risk exposure.

Potential for Profit

Texas has a long history of successful oil and gas production, making it a prime location for ORRI ownership. With the potential for significant profits, investors are under pressure to the state’s energy sector.

Challenges and Risks of Overriding Royalty Interest

While ORRIs offer numerous advantages, they are not without their challenges and risks:

Market Volatility

The oil and gas industry is known for its price volatility. Fluctuations in energy prices can impact the profitability of ORRIs and the income generated for owners.

Lease Terms and Royalty Rates

The terms of the lease agreement and the royalty rates negotiated between the landowner and the drilling company can impact the financial benefits of an ORRI. Unfavorable terms may reduce the potential income.

Environmental and Regulatory Concerns

Oil and gas operations are subject to complex and evolving regulatory frameworks at federal, state, and local levels. Staying compliant with these regulations and addressing environmental concerns is a challenge for ORRI owners.

Key Considerations for Landowners and Investors

For landowners and investors interested in overriding royalty interests in Texas, several key considerations should remain in mind:

Lease Negotiations

Landowners should carefully review and negotiate lease agreements to ensure favorable terms, royalty rates, and protection of their interests. Legal and industry expertise can be invaluable in this process.

Legal and Tax Implications

The legal and tax aspects of ORRI ownership can be complex. Seek professional guidance to understand the unique implications and potential tax benefits associated with ORRIs.

Due Diligence

Before investing in ORRIs, conduct thorough due diligence. Evaluate the potential for profitability, the stability of the drilling company. And the environmental and regulatory factors that may impact the investment.

Overriding Royalty Interests vs. Working Interests

It’s essential to distinguish between overriding royalty interests (ORRIs) and working interests (WIs). While ORRI owners receive a share of the revenue without operational responsibilities, WI owners are actively involved in the drilling and production operations. WI owners also bear a share of the operational costs and risks. Understanding the differences between these interests is critical when considering involvement in the oil and gas industry.

Overriding royalty interests in Texas offer a opportunity for landowners and investors to participate in the state’s oil and gas industry. While they provide a steady income stream and the potential for substantial profits, they are not without their challenges and risks. By carefully considering lease terms, understanding legal and tax implications, and conducting thorough due diligence, landowners and investors can make informed decisions regarding ORRIs in Texas. As a dynamic and ever-evolving industry, the Texas oil and gas sector continues to be a promising source of income and investment opportunities through overriding royalty interests.

 

 

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About $8.5 billion was deposited into two key state funds that wouldn’t exist without oil and natural gas production tax revenue.

$8.5 billion to highway, rainy day funds financed by Texas oil and gas industry

Two Key State Funds

About $8.5 billion was settle into two key state funds that wouldn’t exist without Texas oil and gas industry and production tax revenue, according to state data.

Texas Comptroller Glenn Hegar announced that his office transferred $3.06 billion into the State Highway Fund (SHF) and $5.46 billion to the Economic Stabilization Fund, otherwise known as the Rainy Day Fund.

The two funds normally receive the same amount of money from Texas oil and natural gas industry taxes. However, because another general revenue surplus was write down at the end of fiscal 2023 – after the industry paid record-breaking amounts in taxes – the Rainy Day Fund received $2.41 billion more because of constitutional requirements.

“The strong Texas economy and judicious budgeting by lawmakers netted a surplus that, for the first time in more than a decade, allows us to set aside an additional bucket of money to ensure we are able to weather future downturns,” Hegar said. “The Rainy Day and State Highway funds are tremendous assets for the taxpayers of Texas and help provide the foundation needed for the future of this great state.”

1987 Collections

The combined $6.11 billion severance tax transferred to the Rainy Day Fund and SHF are based on crude oil and natural gas production tax revenues in excess of 1987 collections, in accordance with state constitutional requirements. If either tax generates more revenue than the 1987 threshold, an amount equal to 75% of the excess is move, the comptroller said.

A Constitutional Amendment

In November 2014, voters passed a constitutional amendment requiring at least half of these severance taxes to be allocated to the Rainy Day Fund. The remainder is required to be allocated to the SHF to be used for non-toll highway construction, maintenance and right-of-way acquisition. Additionally, the Texas Constitution provides for a second transfer to the Rainy Day Fund equal to one-half of any unencumbered general revenue surplus at the end of each biennium. This year, an additional transfer of $2.41 billion of unobligated general revenue fund dollars went to the Rainy Day Fund, the comptroller said. The last time such a transfer occurred was in 2008.

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Source: The Center Square

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Unlock the wealth potential of mineral rights while navigating severance taxes. Learn how to optimize income, minimize tax liabilities, and stay compliant. Expert advice for smart decisions in this comprehensive guide.

Mineral rights and severance tax: What landowners should know

DISCLAIMER: We are not financial advisors. The content on this website is for educational purposes only and merely cites our own personal opinions. In order to make the best financial decision that suits your own needs, you must conduct your own research and seek the advice of a licensed financial advisor if necessary. Know that all investments involve some form of risk and there is no guarantee that you will be successful in making, saving, or investing money; nor is there any guarantee that you won’t experience any loss when investing. Always remember to make smart decisions and do your own research!

Mineral rights are a valuable and often complex aspect of property ownership. When landowners possess mineral rights, they have the legal authority to extract and profit from the minerals beneath the surface of their land. This can include a variety of valuable resources such as oil, gas, coal, and minerals. However, the extraction of these resources can lead to the imposition of severance taxes, which are levied on the removal of these minerals. In this comprehensive guide, we will explore the world of mineral rights and severance taxes, shedding light on what landowners should know to navigate this intricate landscape.

Mineral rights can significantly impact the financial well-being of landowners, providing opportunities for income generation and wealth accumulation. However, with these rights come the obligations and complexities associated with severance taxes. Understanding the implications of these taxes is vital for landowners looking to maximize their mineral rights while remaining compliant with legal and regulatory requirements.

Understanding Mineral Rights

Mineral rights, also known as subsurface rights, are legal rights that grant the owner the authority to extract and profit from minerals located beneath the surface of their property. These minerals can include a wide range of resources, such as oil, natural gas, coal, metals, and even water.

Landowners may own both the surface and mineral rights to their property, or these rights may be severed. When mineral rights are severed, a different party, such as a mineral exploration company, holds the rights to extract and profit from the minerals.

The Basics of Severance Tax

Severance tax is a tax imposed by state and local governments on the removal or “severance” of minerals or natural resources from the ground. These taxes are typically levied on the producers or extractors of these resources and vary by state and resource type. Severance tax rates are determined by state legislatures and can fluctuate over time based on economic, political, and environmental factors.

Severance tax revenue is often used to fund state and local government operations, including infrastructure development, education, and environmental conservation.

The Impact of Severance Tax on Landowners

Severance taxes can have various effects on landowners, both positive and negative. Understanding these impacts is crucial for landowners to make informed decisions about their mineral rights.

Reducing Revenue

For landowners who own the mineral rights to their property, the imposition of severance taxes can reduce the income generated from the extraction of minerals. These taxes are typically paid by the resource extraction companies, but the financial burden can be shifted to landowners through lower royalty payments.

Economic Development

Severance tax revenue is often used to fund local and state government programs, including those related to economic development. This can lead to job creation, infrastructure improvements, and community investments, which can benefit landowners in the long run.

Environmental Impact

Severance taxes can also have a positive environmental impact. By taxing resource extraction, governments can encourage responsible and sustainable mining and drilling practices. This can help mitigate environmental damage and promote conservation efforts.

Minimizing Severance Tax Liabilities

While landowners may not have direct control over severance tax rates, there are ways to minimize their tax liabilities and maximize the benefits of mineral rights:

Tax Credits and Incentives

Some states offer tax credits and incentives for resource extraction companies that engage in environmentally responsible practices. Landowners can encourage lessees to take advantage of these incentives, which can reduce overall tax liabilities.

Proper Documentation

Accurate record-keeping and documentation are essential. Landowners should maintain detailed records of their mineral rights agreements, royalty payments, and any deductions or expenses related to the property. These records can be valuable when filing taxes and disputing discrepancies.

Consulting with Experts

Seeking guidance from legal and financial professionals who specialize in mineral rights and taxation can help landowners navigate this complex landscape. These experts can provide advice on tax planning, lease agreements, and compliance with regulatory requirements.

Legal and Regulatory Considerations

Landowners should be aware of the legal and regulatory considerations related to mineral rights and severance tax. These may include:

  • Lease Agreements: The terms and conditions of lease agreements can significantly impact tax liabilities and royalty payments. Landowners should carefully review and negotiate these agreements to maximize their benefits.
  • State and Local Laws: Severance tax rates and regulations vary by state and locality. Landowners should be familiar with the specific laws that apply to their property.
  • Environmental Regulations: Compliance with environmental regulations is crucial. Failure to meet these requirements can result in fines and legal disputes.
  • Property Assessments: Some states use property assessments to determine severance tax liability. Understanding how your property is assessed can help you plan for tax obligations.

Mineral Rights and Severance Tax

Mineral rights can be a valuable asset for landowners, offering the potential for income generation and wealth accumulation. However, the imposition of severance taxes can impact the financial benefits associated with these rights. To navigate this complex landscape, landowners should be well-informed about the implications of severance taxes, work to minimize their tax liabilities, and stay compliant with legal and regulatory requirements.

Seeking guidance from legal and financial experts who specialize in mineral rights and taxation is a proactive approach to optimizing the financial outcomes of mineral rights ownership. By understanding the role of severance taxes and taking informed actions, landowners can make the most of their mineral rights and contribute to responsible and sustainable resource extraction practices.

 

 

 

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United States projected to extract 12.9m barrels of crude oil as countries at Cop28 to push for agreed fossil fuels ‘phaseout’

US oil and gas production set to break record in 2023 despite UN climate goals

Extract More Oil and Gas than Ever Before

The oil and gas production of United States is confident to extract more oil and gas in 2023.

The US’s status as the world’s leading oil and gas production behemoth has only fortify this year, even amid warnings from Joe Biden himself over the expanding climate crisis, with the latest federal government forecast showing a record 12.9m barrels of crude oil, more than double the manufacture a decade ago, will be extracted in 2023.

Records will break this year for gas production. With a glut of new export terminals on the Gulf of Mexico coast. Facilitating a boom that will see US exports of liquified natural gas (or LNG) double in the next four years.

Oil and Gas Activity to Continue at Near-Record Levels

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Source: The Guardian

 

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An effort to expand access to oil and gas production courses to other high schools in TX and NM is underway.

An effort to prepare West Texas students to work in the oil and gas industry is expanding

West Texas Students

Giovanni Parra’s instructor asked the class (West Texas Students) to weld the opposite ends of a wire during a lesson on soldering. The 16-year-old sprinted to the nearest workstation.

Parra is among dozens of students in a technical education program offered by the Midland school district that is preparing students to work in their own backyard, the oil-rich Permian Basin.

Unlike other classes at his high school, this one makes Parra feel connected to his family’s legacy.

“My whole family works in the oil fields,” Parra said. “I’m trying to see what I’m good at.”

One of a Few Students

Parra, a sophomore, is one of a few students who have access to this sort of hands-on learning. Within the 55 counties making up the Permian Basin between Texas and New Mexico. Just four school districts offer classes that directly prepare students for work in the oil fields. A highly competitive market always short of workers.

Hundreds of students in Odessa are on a waitlist to take classes that teach them the basics of oil and gas.

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Source: The Texas Tribune

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Oil and Gas Leasing for passive income: Tips and Strategies

DISCLAIMER: We are not financial advisors. The content or topic (Oil and Gas Leasing) on this website is for educational purposes only and merely cites our own personal opinions. In order to make the best financial decision that suits your own needs, you must conduct your own research and seek the advice of a licensed financial advisor if necessary. Know that all investments involve some form of risk and there is no guarantee that you will be successful in making, saving, or investing money; nor is there any guarantee that you won’t experience any loss when investing. Always remember to make smart decisions and do your own research!

Oil and Gas Leasing

In today’s economic landscape, many individuals and investors are seeking ways to generate passive income. Leasing oil and gas rights is a unique and potentially lucrative avenue for achieving this financial goal. With the increasing demand for energy resources, oil and gas leasing can offer a steady stream of income without the need for active involvement in day-to-day operations.

In this comprehensive guide, we will explore the world of leasing oil and gas for passive income. We will cover the basics, the benefits, the risks, and provide valuable tips and strategies to help you make informed decisions and maximize your earning potential in this dynamic industry.

Oil and Gas Leasing: Understanding

Leasing Oil and Gas involves landowners granting exploration and drilling rights to energy companies in exchange for royalties, lease payments, and bonus payments. These agreements allow energy companies to access and extract oil and gas resources from the landowner’s property.

The process typically starts with negotiation, followed by the signing of a lease agreement. The lease agreement outlines the terms, including the duration of the lease, royalty rates, bonus payments, and operational details.

Oil and Gas Leasing: Benefits

Leasing oil and gas rights can offer several compelling benefits, making it an attractive option for generating passive income:

Steady Income Stream:

It often provide consistent royalty payments, which can serve as a reliable source of passive income. This income stream can be particularly valuable for landowners who may not have other revenue sources from their property.

Portfolio Diversification:

Investors can diversify their portfolios by adding oil and gas leases, reducing their reliance on traditional investments like stocks and bonds. Diversification can help spread risk and enhance financial stability.

Capital Appreciation:

As energy resources are extracted from the leased property, the value of the land may appreciate over time, potentially leading to increased property value and profits upon selling or re-leasing.

Low Active Involvement of Oil and Gas Leasing:

It typically requires minimal day-to-day involvement, making it an ideal source of passive income. Landowners and investors can enjoy financial benefits without actively managing operations.

Inherent Demand:

The global demand for energy resources, particularly oil and natural gas, remains consistently high. This demand ensures a continued market for oil and gas leases, creating opportunities for long-term income generation.

Oil and Gas Leasing: Risks and Challenges

While leasing oil and gas rights offers various benefits, it’s important to be aware of the potential risks and challenges associated with this investment:

Market Volatility:

The oil and gas industry is known for its price volatility. Fluctuations in energy prices can affect the profitability of oil and gas leases and the income generated.

Environmental Concerns:

It can impact the environment, leading to potential regulatory changes and increased costs related to environmental compliance and remediation.

Regulatory Complexities:

Oil and gas leasing is subject to complex and evolving regulatory frameworks at the federal, state, and local levels. Staying compliant with these regulations can be a challenge.

Geopolitical Risks:

Global political events, trade tensions, and conflicts can influence the energy market, affecting the value and profitability of oil and gas leases.

Lease Performance Variability:

The actual performance of oil and gas leases can vary based on the property’s reserves, the technology used, and the energy company’s expertise.

Oil and Gas Leasing: Tips for Passive Income

To successfully lease oil and gas rights for passive income, consider these valuable tips:

Conduct Thorough Research

Before entering into any lease agreement, conduct comprehensive research. Assess the geological potential of the property, review historical production data, and identify any existing or potential environmental and regulatory challenges.

Seek Legal and Financial Guidance

Engage legal and financial professionals with expertise in oil and gas leasing. These experts can help you understand lease agreements, evaluate lease terms, and navigate the complex legal and tax aspects of the industry.

Negotiate Favorable Lease Terms 

Negotiate lease terms that align with your financial goals. Ensure that royalty rates, bonus payments, and lease duration are favorable and competitive within the industry.

Diversify Your Portfolio

Diversification can help spread risk. Consider including a mix of oil and gas leases in different regions or with different energy companies to reduce reliance on a single lease.

Monitor Market Trends

Stay informed about market trends, energy prices, and geopolitical events that could impact the industry. This information will help you make strategic decisions regarding your oil and gas leases.

Assess Environmental and Regulatory Factors

Be proactive in addressing environmental and regulatory challenges. Implement environmentally responsible practices, and stay compliant with evolving regulations to mitigate risks and potential liabilities.

Strategies for Maximizing Passive Income

To maximize passive income from oil and gas leasing, consider the following strategies:

Lease Structuring 

Work with experienced professionals to structure your lease agreements in a way that optimizes income potential and minimizes risks.

Royalty Interest vs. Working Interest

Determine whether you prefer a royalty interest, where you receive a percentage of production revenue without operational responsibilities, or a working interest, where you have an ownership stake in the operations but also assume associated costs and risks.

Active vs. Passive Investment 

Decide whether you want to actively manage your oil and gas leases or take a more passive approach. Passive investors may choose to work with reputable energy companies that handle day-to-day operations.

Tax Planning 

Implement tax planning strategies to optimize your financial outcomes. Consult with tax professionals who understand the unique tax implications of oil and gas leasing.

Leasing-oil-and-gas

Oil and Gas Leasing rights for passive income is a compelling financial opportunity for landowners and investors. With the potential for steady income streams, capital appreciation, and portfolio diversification, oil and gas leases can be a valuable addition to your investment strategy.

However, it’s essential to approach this industry with careful consideration, thorough research, and the guidance of legal and financial experts. By staying informed about market trends, understanding the challenges and risks, and employing strategic leasing and investment approaches, you can harness the passive income potential of oil and gas leasing while mitigating potential pitfalls. Remember that the world of oil and gas leasing is dynamic, and proactive management is key to long-term success in this field.

 

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