Separating your Mineral Rights:
Remember Real Estate Taxes
By Dick Emens, Sean Jacobs & Craig Wilson
Some eastern Ohio landowners are being taxed two, three, maybe even four times more on their real estate than in previous years. Why? Primarily because of the increased value of the oil and gas rights in eastern Ohio where the Utica/Point Pleasant Shale is being developed and where a landowner separates the oil and gas minerals from the surface. When the mineral interests are separated from the surface, the Ohio Revised Code (section 5713.04) requires the county auditor to list and value the land in separate entries, specifying the interest listed, and tax the parties owning the different interests.
Who Pays What Tax?
Often county Auditors are not taxing the mineral interest in property where the landowner owns both surface and mineral rights together. So, typically a landowner pays only the property taxes on the surface. However, if the mineral rights are separated from the surface, the mineral tax is paid by the mineral owner.
Why Separate your Mineral Interest?
There are any number of reasons why a landowner may consider separating their mineral rights from the surface. Three of the most common reasons are (1) the landowner sells the property but retains or reserves the mineral rights, (2) the landowner sells the mineral rights to someone else like a mineral buyer (see our article on the consideration of selling your mineral rights located on our website), and (3) landowners who separate the mineral interests for estate, succession and tax planning purposes. Any one of these instances could trigger the county Auditor to start taxing the mineral rights separately from the surface. Leasing mineral rights to another entity does not cause a separate tax bill on the mineral rights to be created.
How Much is the Mineral Tax?
Traditionally, oil and gas rights that have been separated are valued based on production of a well. See Ohio Administrative Code (sec. 5703-25-11(I)). However, sometimes there is no well production to determine the value of the minerals. In this case, some county auditors have assigned values of $200, $300, or $400 per acre to some or all of separated mineral rights. Below is short list of some of the counties in eastern Ohio and the values each county is assessing to the mineral rights:
|
Ohio County |
Assessed Value as of 2/4/14 |
| Belmont County | $1,500/acre for all minerals ($300 each for coal, iron ore, limestone, clay, and oil and gas) |
| Carroll County | $300/acre for all minerals |
| Columbiana County | $100/acre for all minerals; oil and gas only not assessed until production; individual minerals $100/acre |
| Guernsey County | No mineral value |
| Harrison County | $300/acre for oil and gas; $400/acre for coal; $400 for all minerals |
| Jefferson County | No value for just oil and gas; $100/acre for all minerals; $100/acre for coal |
| Monroe County | No mineral value |
| Noble County | No mineral value |
Conclusion
When you are considering separating your mineral rights from the surface, understand there may be tax consequences and seek counsel that understands how to help save you mineral taxes. Moreover, know that you may have the right to challenge the assessed value of the mineral rights. We are happy to have an initial phone conference with you, if you wish, at no cost to you if you call Dick Emens, Sean Jacobs, or Craig Wilson at (614) 414-0888. Emens Wolper Jacobs & Jasin Law Firm represents landowners only in Ohio and our attorneys have spoken about oil and gas matters to more than 8,000 Ohio landowners, and we represent hundreds of Ohio landowners in all aspects of Ohio oil and gas mineral law. More information about our law firm and our attorneys is available on our website at ewjjlaw.com.
