The Oklahoma Bar Journal May 2024

rights fluctuate, the establishment of the value of mineral rights are established based on the opinion of collateral sources,” but also, “actual offers of purchase are used when established as a legitimate offer through a collateral source.” 3 When considering this path for valuation, it is also important to weigh the investment of client funds in a paid valuation from an external professional against the anticipated attributable resource value expected in accordance with Oklahoma Human Services’ cur rent formulas for calculation. When an applicant does not supply an external mineral inter est valuation, they may submit mineral interest ownership doc umentation so that Oklahoma Human Services may provide them with a valuation. These valuations employ formulas for calculating the fair market value of mineral interests in three cate gories or, for the purposes of this article, “pathways.” Valuations take into consideration not only the interests’ current production but also the future potential for production. Because of this, open (or unleased) mineral interests that have never produced are often attributed a higher resource value than some currently producing. This can be quite surprising to applicants, especially those who have held mineral interests for several decades with no offers of lease or purchase. Pathway 1 – The Royalty-Producing Mineral Interest Valuation Formula Fair market value = (gross royalties/12) x 36. For example, GUIDEPOST 3 – AGENCY MINERAL INTEREST VALUATION

Valuations take into consideration not only the interests’ current production but also the future potential for production. Because of this, open (or unleased) mineral interests that have never produced are often attributed a higher resource value than some currently producing.

with the caveat that, “Generally, a resource is considered unavailable if there is a legal impediment to overcome. However, the member must agree to pursue all reasonable steps to initiate legal action within thirty (30) days. While the legal action is in process, the resource is considered unavailable.” 5 Especially with regard to mineral interests in which ownership may be extensively divided into very small interests over the years, it is important to note that if a determi nation is made and documented that the cost of making a resource available exceeds the gain, the member will not be required to pursue action to make it available. GUIDEPOST 2 – EXTERNAL PROFESSIONAL MINERAL INTEREST VALUATION Applicants have the opportunity to present mineral interest valuations from professionals knowledgeable in the area, pursuant to the Oklahoma Administrative Code, which designates not only that “since evaluation and salability of mineral

associated with home property that are income-producing are considered in the same way as income-producing property. 3 Where mineral rights are nontrade or nonbusiness property, up to $6,000 of the equity value is excluded as a resource if the property produces a net annual return equal to at least 6% of the excluded equity, and any portion of the property’s equity value in excess of $6,000 is a countable resource. 4 (This exclu sion applies to royalty-producing mineral interests, but not mineral interests that are leased and have never been royalty producing.) Legal impediment exclusion. In the legal impediment exclusion, only those resources available for current use or those that the member can convert for current use (no legal impediment involved) are considered countable resources. Legal impediments include but are not limited to clearing an estate, probate, petition to sell or appointment of legal guardian and present subject assets to exclu sion from resource calculations,

Statements or opinions expressed in the Oklahoma Bar Journal are those of the authors and do not necessarily reflect those of the Oklahoma Bar Association, its officers, Board of Governors, Board of Editors or staff.

50 | MAY 2024

THE OKLAHOMA BAR JOURNAL