Glossary
Forced Pooling
Laws vary by state, but generally forced pooling statutes provide that a unit can be established by the state regulatory agency, and requires that all mineral owners must accept a lease offer, agree to participate in the drilling of the well in an amount based upon their mineral acres portion of the total unitized area, or do nothing which subjects such mineral owner to having to wait until the well reaches payout or sometimes double payout of drilling, completion, and operating expenses before the mineral owner receives their share of the production.
Lease Bonus
Cash that is paid to mineral rights owners as an inducement to lease the mineral rights.
Lease Royalty Percentage
The percentage or fraction of future oil and gas production that you reserve in your oil and gas lease.
Example: You execute a lease with an oil and gas company, and negotiate a ¼ or 25% royalty, which becomes your portion of the future oil and gas production attributable to your mineral interest during the term of that lease.
Mineral Acre
All of the oil and gas rights under one acre of land surface.
Example: There are 40 mineral acres under 40 surface acres.
Mineral Ownership Percentage
Your portion of oil and gas mineral ownership within a tract of land. It can be expressed in fractions, decimals, or percentages.
Example: You may own half or 0.5 or 50 percent of the minerals under a tract of land.
Net Acre
A measurement term to state the number of acres owned by an undivided interest owner who owns less than all the mineral acres (gross acres) in a mineral tract.
Net mineral acre
the acreage measure of a mineral owner’s proportion of undivided ownership within a tract. Example: A one-half mineral ownership in a 40 acre tract of land equates to 20 net mineral acres.
Non-participating mineral interest
Whereas a full mineral rights interest includes the right to execute leases, receive lease bonus, delay rental and royalty payments payments, a non-participating mineral interest would have no executory or decision making power but would receive all monetary payments. Example: A predecessor in title may have reserved a portion of the mineral rights in a conveyance, but also reserved all of the executive rights in order to control the lease negotiations for both the predecessor and subsequent owners of a portion of the non-participating mineral rights.
Non-participating royalty interest
The right to receive a share of the production, but no rights to execute leases, receive bonuses or delay rentals.
Example: A non-participating royalty owner will see no activity or revenue until the tract of land produces oil and gas, but at the time of production, the owner will receive a division order and be paid a proportion of the royalties under the mineral owner’s lease agreement.
Offset Drilling
Drilling activity that is located close to your mineral tract, but is not located on your mineral tract.
appraisal well – a well drilled in the area of a new discovery well in order to gather more geologic and reservoir knowledge.
Oil and Gas Royalties
A fraction of the oil and gas produced from the property that has been reserved as a royalty that is free of liability for the costs associated with drilling and producing a well.
Proposition 112
Establishing basis for inherited property – Oil companies require that an heir to mineral and royalty rights prove their inheritance by provided estate probate filings or, in the event the deceased died without a Will that was probated, then provide an Affidavit of Heirship that is signed by a disinterested third party who states they have knowledge of the family history of the deceased property owner as set out in the affidavit.
Royalty Deed
A conveyance of a royalty interest in a tract of land.
Tract Size
The number of surface acres of a parcel of land. Tract size is also commonly called ‘gross acres’ by landmen.
Example: You may own all or a portion of the minerals under a fifty acre tract of land.
Unit Size
The total number of acres pooled together by an operator or established by a government regulatory agency in order to establish shared production from an oil and gas well or wells. Unit size is ideally proportionate to the expected drainage area of a well and enables royalty owners to share in the production based upon their proportionate mineral ownership within the unit. Example: You may own all the minerals under a 40 acres tract that was included in an 80 acre unit. In this case you would receive your lease royalty percentage of one half of the oil and gas production from any wells on the unit.
Unsolicited Offer
A lease or mineral purchase offer made by a party that was not invited to make such an offer.
mineral rights – oil, gas, and related hydrocarbons that can be owned separate from the surface estate and produced through a wellbore.
What Does Having Mineral Rights Mean?
Mineral rights ownership can include the executive rights to grant a lease on the mineral rights, or such rights can be non-executive mineral rights that receive a portion of all payments of lease bonus, rentals, and royalties, but have no lease granting rights.