Property

317:35-5-41.1(b)(1)

All mineral rights have a value, whether the client is receiving royalties or not. Mineral rights associated with home property are considered as part of the home property. If the property is excluded as a resource, the minerals are also excluded. Mineral rights NOT associated with the home property are considered a resource. If you have a question about whether your client’s mineral interest is associated with the home property, please staff with your supervisor or field manager before contacting AFS.MineralRights at AFS.MineralRights@okdhs.org.

Pursuant to 317:35-5-41.1 (a)(3) and (9) and 317:35-5-41.8 (a), the value of a mineral interest can be excluded as a resource for an established period of time if the client is making a good faith effort to sell it. If you have any questions regarding this exclusion, please staff with your supervisor or field manager before contacting AFS.MineralRights at AFS.MineralRights@okdhs.org.

The value of a minerals interest is established based on the opinion of collateral sources with knowledge of mineral values for the area in question and should be obtained by the clients or their representatives. Actual offers of purchase can be used when established as a legitimate offer through a collateral source. Because the value of mineral rights fluctuates, values must be obtained prior to certification of benefits and at each annual re-determination of eligibility.

Please refer to the following instructions:

If there is a working/producing interest, you want to request prior year’s (from the date of application/recertification) 1099(s) (income statement) from the applicant/recipient reflecting the income from the producing interest. Then, you will staff the case with your immediate LTC supervisor.  Please put in the subject line of the email “FMV Mineral Interest Request.”  LTC supervisors will review with each worker to determine the values.

If there is a non-working/non-producing interest (e.g. the applicant/recipient owns the mineral interest on the land, but there is no production or royalty interest being paid to the applicant/recipient), you want to request that the applicant/recipient obtain and provide to you two (2) FMV estimates from an individual who is knowledgeable about FMVs for mineral interests (e.g. a landman; a real estate agent; a local banker; and/or a oil/gas company representative).  Then, you will average the two (2) FMVs that you receive to determine the FMV for the mineral interest.  If the two (2) FMVs that you receive vary/differ widely, please staff with your supervisor with the two (2) FMVs attached to an email explaining your issue.  Please put in the subject line of the email “FMV Mineral Interest Request.”

If the applicant/recipient is not able to provide the two (2) FMVs in a timely manner, please staff with your LTC supervisor on how to proceed.  Please put in the subject line of the email “FMV Mineral Interest Request.”

With any requests or pending cases on Mineral Rights the email sent to AFS.MineralRights@okdhs.org should have your supervisor, FM, DD, & HRMS, copied.

Any case that is pending a hearing, please put in the memo line (e.g. the email subject line: HEARING-MINERAL INTEREST VALUATION). AFS.MineralRights@okdhs.org

Please review the following quest links for reference: 

ABD: Income – Mineral Rights

Mineral Interest Valuations – Ten Quick Tips

LTC: Letter to Oil/Gas Company (Mineral Rights)

LTC: Oil Company Contact List

Categories of Mineral Interests

It can save your client and you a significant amount of time and avoid requests for documents that are not necessary, if you determine which category describes each of your client’s mineral interests before requesting documents and a mineral valuation. Those categories and the information needed to value the mineral interests are listed below:

1. Mineral interest that is not leased.
   1. Documentation that lists the legal description of the mineral interest (e.g. Section 4-5N-10E, Oklahoma County, OK); and
   2. The number of net mineral acres owned by the client in that mineral interest.
   3. If the client does not have any documentation regarding the number of net mineral acres he or she owns, the mineral interest value will be based on the number of acres indicated by the legal description for the mineral interest.

   The Oil and Gas Lease will list a number of acres, but in most cases this is not the number of net mineral acres owned by the client, but rather the gross number of acres indicated by the legal description. The number of net mineral acres owned by a client is sometimes referenced on documentation from an oil company that offered to lease the mineral interest or a landman who is currently trying to lease the mineral interests. If the mineral interest was previously leased, the company that leased the mineral interest may be able to provide the number of net mineral acres owned by the client. This information can make a significant difference to the value of the client’s mineral interest.

   If the client inherited the mineral interest, it is helpful to obtain a copy of the final Order issued in the probate of the person from whom the mineral interest was inherited or the deceased person’s Will.

2. Mineral interest that is leased, but has not paid royalties
   1. Documentation that lists the legal description of the mineral interest (e.g. Section 4-5N-10E, Oklahoma County, OK); and
   2. The 1099 issued by the oil company in the year the lease bonus was paid.*

   * The number of net mineral acres a client owns is NOT needed if the mineral interest is leased, but if you have that information you can provide it.

   The gross amount of the lease bonus is reported in the “rents” box on the 1099. If the client does not have a copy of the 1099, you can contact the oil company that paid the lease bonus to request the gross amount of the lease bonus paid to the client. If the client does not have any documentation that shows the legal description of the mineral interest, the oil company should be able to provide that information, too. Refer to Contact List for Oil and Gas Companies.

3. Mineral interest that is leased and paying royalties
   1. Documentation that contains the legal description of the mineral interest (e.g. Section 4-5N-10E, Oklahoma County, OK); and
   2. The 1099 issued by the oil company in the year preceding the client’s application or the year preceding the annual review.*

   * The number of net mineral acres a client owns is NOT needed if the client is receiving royalties, but if you have that information you can provide it.

   For example, if the client files an application in 2019, you should request a copy of the 2018 1099 or the Schedule E of the client’s 2018 federal tax return. Oil companies issue 1099s for the preceding year in January. If the client does not have a copy of the 1099, you should contact the oil company that issued the payments to request the gross amount of the royalties owed to the client in the preceding year. If the client does not have any documentation that shows the legal description of the mineral interest, the oil company should be able to provide that information, too. Refer to Contact List for Oil and Gas Companies.

Disputing the Value of a Mineral Interest

If the value of the mineral interest, as determined by DHS, adversely affects the client’s eligibility for benefits, the client or the client’s family can submit an alternative valuation from a credible source that is knowledgeable about the oil and gas industry in the county where the mineral interest is located. In addition, the client or the client’s family can submit an alternative valuation from a credible source that is knowledgeable about the oil and gas industry in the county where the mineral interest is located, if the client or the client’s family wants to sell the mineral interest and disagrees with DHS’ value/ The client or the client’s family also has the right to request a fair hearing to contest the value of the mineral interest, if the value affects the client’s eligibility for benefits.

Resource Exemption

Exemption as a Resource Under $6,000.00 / 6% Rule

It is possible that a mineral interest, that is leased and paying royalties to the client, may be an exempt resource pursuant to 317:35-5-41.12(b)(3). For property which produces income, but is not used in a trade or business; up to six-thousand ($6,000) of the equity value is excluded, if the property produces a net annual return equal to at least six percent (6%) of the excluded equity.

Any portion of the property’s equity in excess of six-thousand dollars ($6,000) is a countable resource.

If an individual owns more than one (1) piece of income-producing property, the six percent (6%) return requirement applies individually to each property and the six-thousand ($6,000) equity value limit applies to the total equity value of all the properties meeting the six percent (6%) return requirement.

Examples of non-business income producing property are rental property, timber rights, mineral rights, etc. This only applies to mineral interests that are paying royalties.