What mineral rights are worth

30 C.F.R. § 1206.101(a)

For oil sold under an arm's-length contract, the value a federal royalty is calculated on is the gross proceeds accruing under that contract, less the transportation and processing allowances the regulations permit. The royalty owed is that value multiplied by the volume and by the lease's royalty rate.

Checked July 29, 2026. Read at ecfr.gov, current edition, on 2026-07-29. Two features matter for anyone checking a statement. Where a lease is sold under several arm's-length contracts, the value is the volume-weighted average of the values for each contract, not a simple average. And this arm's-length basis does not apply where ONRR decides to value the oil under § 1206.105, or where the payor exercises certain options in paragraph (c). NOT READ HERE: the allowance provisions themselves at §§ 1206.111 and 1206.112, the non-arm's-length valuation rule at § 1206.102, the gas valuation subparts, and the Indian lease provisions, which are governed separately and by trust obligations.

26 C.F.R. § 20.2031-1(b)

For estate purposes, fair market value is the price at which property would change hands between a willing buyer and a willing seller, neither under any compulsion and both reasonably informed. The regulation says expressly that fair market value is not to be determined by a forced sale price.

Checked July 29, 2026. Read at ecfr.gov on 2026-07-29. The next sentences of the same paragraph are the useful ones for a mineral owner weighing an unsolicited offer: value "is not to be determined by a forced sale price", and not by the sale price in a market other than the one in which the item is most commonly sold. This is the estate valuation standard, and it is the definition courts and appraisers work from. It is not a claim that any particular offer is above or below fair market value, which is a question about a specific tract that this site does not answer.

26 U.S.C. § 1014

Property acquired from a decedent takes as its basis the fair market value of the property at the date of the decedent's death, so an inherited mineral interest starts with a basis set at that date rather than whatever the decedent originally paid.

Checked July 29, 2026. Read at uscode.house.gov, text in effect on July 28, 2026. Three alternatives to the date-of-death value appear in the same subsection and are the reason this is not a one-line rule: an alternate valuation date elected under section 2032, a special-use value under section 2032A, and the decedent's own basis to the extent of the section 2031(c) exclusion. Read together with the fair market value definition above, this is why a dated valuation at the date of death is worth having in writing. NOT READ HERE: which property counts as acquired from a decedent under subsection (b), and how basis is allocated between a mineral interest and the surface where both pass together.

26 U.S.C. § 1221

A capital asset is property held by the taxpayer, whether or not connected with a trade or business, but the definition carves out inventory, property held primarily for sale to customers in the ordinary course of business, and depreciable or real property used in a trade or business.

Checked July 29, 2026. Read at uscode.house.gov, text in effect on July 28, 2026. The definition is quoted rather than applied deliberately. Whether a particular mineral interest is a capital asset in a particular owner's hands depends on which of these exclusions bites, and exclusion (2) reaching real property used in a trade or business is the one that makes the answer genuinely different for an investor holding a royalty and an operator working a lease. NOT VERIFIED HERE: how a mineral interest is characterised under this section, or the interaction with section 1231, neither of which was read. A reader who needs that answer for their own interest needs an accountant reading their own facts, not a page.

Internal Revenue Service

The IRS directs royalties to Schedule E of Form 1040, the same schedule used for rental real estate and for income from partnerships, S corporations, estates and trusts.

Checked July 29, 2026. Quoted from the IRS's own page for Schedule E, read on 2026-07-29, which also links the current revision and its instructions. NOT READ HERE: the Schedule E instructions themselves, how depletion is entered on the schedule, and how a working interest is treated differently from a royalty interest. The percentage depletion allowance a royalty owner may be entitled to is on the federal record under 26 U.S.C. 613A; how it lands on this form is not.

U.S. Energy Information Administration

The Energy Information Administration publishes monthly natural gas price series, by state and for the United States, in dollars per thousand cubic feet, which means the price half of any valuation arithmetic can be checked against a public federal series rather than taken on trust.

Checked July 29, 2026. The page's own heading, units and area selector were read on 2026-07-29. The series is offered for the United States and for each state, on a monthly basis. The data tables themselves require JavaScript and did not render to a plain fetch, so no price figure is taken from this reading and none is published here: what is established is that the series exists, who publishes it, and in what units. That is the part that matters for the argument this section makes, which is that a valuation resting on a public series can be checked and a valuation resting on a buyer's own published range cannot.