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MEDICAL SERVICES POLICY MANUAL, SECTION E

E 515 Determining the Value of an Oil & Gas Lease

b. Refer to MS E-516 to determine if the income producing property will meet the $6,000 exclusion.

Example: Mr. Piper owns 5 acres of non-home property. The current market value of the land is $5,000. It is earning $50 per month. In order to qualify for an exclusion per MS E-516 #2.a., it must be earning 6% of $5,000 or $300 per year. In this case, the land would meet the exclusion.

3. Owns Mineral Rights But Not Real Property a) If a client owns the mineral rights for land that he/she does not own, the caseworker will calculate the value of the oil and gas lease by multiplying the most recent year’s royalties by 5. The amount of yearly royalties for the previous year can be obtained on the income tax Form 1099, Miscellaneous Income. If the 1099 is not available, the total amount of revenue from the royalty checks received in the previous year will be used to calculate the lease’s resource value. If the value causes ineligibility, the caseworker will initiate action to deny or close unless the individual wishes to obtain a knowledgeable source estimate to rebut the value. Such sources include, in addition to those found at MS E-514 #2, the Bureau of Land Management, the U.S. Geological Survey, and any mining company familiar with leases in the area.

The value of the mineral lease alone is the resource value.

Example: Per the 2011 Form 1099, the annual revenue from the royalties on the mineral lease for 2010 was $443.25. Multiply this number by 5. $443.25 X 5 = $2,216.25. This will be the value of the mineral lease. Example: The client received royalty checks for $57.15, $115.32, and $100.03 for the year 2011. The total of these checks is $272.50. Multiply this number by 5. $272.50 X 5 = $1,362.50. This is the value of the mineral lease. b) The caseworker will need to refer to MS E-516 to determine if the income producing property will meet the $6,000 exclusion.

Royalty payments from a mineral lease will be considered as unearned income in the month received and as a resource if retained the following month.