Dividing Oil, Gas, and Mineral Interests During Divorce

 Posted on July 23, 2018 in Complex Property Litigation

High asset divorces are not only complicated because the property that must be divided is valuable, but also because the assets are often difficult to value or to distribute. For instance, it is not uncommon for Texas couples to invest in local operations that are involved in the production of oil, gas, and minerals. While these investments can be extremely valuable, they are also hard to distribute in the event that a couple decides to divorce. If you or your spouse own an interest in an oil, gas, or mineral business and are thinking about dissolving your marriage, you may be facing unique issues when it comes to dividing your assets. Please contact an experienced Cedar Park high asset divorce attorney to learn more about your legal options.

Dividing Assets Equitably

Texas is a community property state, which means that all of a couple’s marital assets must be divided equitably upon divorce. While this usually involves dividing bank account funds, the family home, and retirement funds, it applies equally to unique assets, such as oil, gas, and mineral interests. These types of interests are considered real property and as such, are governed by the same property division principles as any other type of real estate. For this reason, a party can only retain sole ownership of this type of interest, if he or she can prove that the asset qualifies as separate property, which means that he or she:

• Owned the land and interests before the marriage took place; or
• Received those interests during the marriage as a gift or as part of an inheritance.

Unfortunately, the issue of whether an interest in oil, gas, or minerals qualifies as separate property can become complicated. For instance, even if the interests were given as a gift during the course of the marriage, they will only be considered separate property if one spouse can show that the gift was not given to both spouses, but to him or her alone. Otherwise, each spouse would most likely receive half of the property interest in surface and mineral rights.

Determining the value of gas, oil, and mineral interests is also a difficult process, as it requires the parties to take into account whether the property produces royalty income, as well as the value of the leasehold and working interests in the property. Again, value will differ depending on whether the interest involves oil reserves that are extracted via drilling, natural gas obtained from hydraulic fracturing, or minerals obtained from mining a quarry.

Oil and Gas Leases

In Texas, income earned from separate property during a marriage is usually considered community property. However, this rule doesn’t apply when one spouse leases his or her mineral interests to an energy or oil and gas company. In these cases, the payments made under the lease are treated as separate property and so will remain in the sole possession of a single spouse. This includes bonus signing payments and royalty payments made by the energy company.

Call Our High Asset Divorce Legal Team

To discuss your case with a Cedar Park high asset divorce lawyer from Powers and Kerr, PLLC, please contact us today. We are eager to assist you throughout each step of your case.

Source:

https://statutes.capitol.texas.gov/Docs/FA/htm/FA.3.htm