Ownership and Rights
Are mineral and royalty interests considered real or personal property?
Both mineral and royalty interests are considered real property.
How do I know if I own my mineral rights?
Ownership of mineral rights may be separate from surface property rights; you own mineral rights unless they were reserved by a previous owner.
What are executive rights in mineral ownership?
Executive rights grant the authority to negotiate and sign oil & gas leases. They include rights to lease bonuses, delay rentals, and royalty payments.
What defines a Non-Participating Royalty Interest (NPRI)?
An NPRI exists when a mineral owner conveys a portion of their royalty interest without transferring the right to execute leases. NPRI owners receive a share of oil & gas revenue, minus operational costs, based on the negotiated lease terms.
Lease Agreements
What differentiates executive rights holders from NPRI owners?
Executive rights holders have leasing authority and can receive bonuses and rentals, while NPRI owners only receive a share of the royalties.
What is a regulatory lease?
A regulatory lease designates an area for oil & gas operations that includes at least one undivided mineral estate owner.
What is the purpose of a Pugh clause in oil and gas leases?
A Pugh clause terminates the oil & gas lease on unproductive acreage outside a production unit after the primary term expires.
Why is the Continuous Development Clause significant in oil and gas leases?
The Continuous Development Clause allows lease extension through scheduled operations, terminating the lease on unused acreage.
What prompts the need for a ratification in oil & gas leases?
Ratifications confirm lease terms or consent to pooling and are often requested from executive rights holders or NPRI owners.
Operations
What is a working interest in the context of oil and gas?
A working interest represents an ownership percentage in oil & gas operations, responsible for covering operational costs.
Why might a company other than the original lease holder drill on my tract?
Multiple companies might lease minerals under a single tract, assigning leases to an operating entity or forming a joint agreement to appoint a single operator.
What differentiates a pooled unit from an allocated well?
Pooled units and allocation wells differ in how royalties are calculated, based on acreage or perforated wellbore within a tract.
Financials
What does the decimal on my royalty check represent?
The decimal indicates your net revenue interest in the production, reflecting your proportionate share of the revenues.
How is net-revenue-interest calculated?
It's calculated by multiplying your mineral interest by the lease royalty rate, potentially adjusted by a tract participation factor.
What are the tax implications of divesting mineral or royalty rights?
Divesting creates a one-time tax event, whereas receiving royalty payments incurs annual taxes. Consult a tax professional for specific impacts.
Can I sell my minerals if they are held in a trust?
The ability to sell minerals in a trust depends on the terms of the Trust Agreement, which varies by trust.