Replies to This Discussion

Permalink Reply by Dion Warr, CPL on February 11, 2013 at 6:17

John:

I do remember reading about this way back when; I went to search for the original discussion and found that many of the contributors had committed "shalecide" which eliminated their comments along with their accounts.

 

From what I recall, your mother had acquired royalty deeds; this would make her (and by extension, you) an owner of an NPRI (non-participating royalty interest) in these certain wells and units.  If she only bought royalties from the proceeds of the leases (not in the land, from the mineral owner), that could be a different animal entirely, as if the lease contract expires, your interest in those royalties would be dead, much the same as if she would have been assigned an overriding royalty interest (ORI or ORRI) by the owner of the lease (being a working interest owner, or WI).

 

If by chance your mother acquired NPRI from the mineral owner not bound by or contingent to the lease, you would still own these interests irrespective of the lease status, however, you would not possess the right to enter into such a lease yourself (you are not an owner in the minerals; NPRI owners lack executive rights, hence why they are "non-participating").  By ratifying the lease, you will receive the royalties to which you would be entitled; if you don't, you all but certainly won't.  As an NPRI owner, you would be entitled to receive royalty only up to the level to which you own interest; you can't force the O&G company to give you more.

 

To borrow from an analogy that a fellow landman once made, as an NPRI owner, you're in the passenger seat - you don't have the right to drive the car or say where it's going, but you have the right to go on the trip and the benefit of getting there, unless you want to give someone else your seat.  I would surmise you would also have the right to leave the seat empty (and not ratify the lease, in this analogy), but why?

 

As to anyone "not wanting to comply" - send them the copy of the judge's order vesting you with the interest and authorizing the release of funds; you may wish to have a nice letter drafted by an attorney attached to same on your behalf.  As to the rest, good luck to you.

• ▶ Reply

Permalink Reply by Skip Peel - Mineral Consultant on February 11, 2013 at 6:23

Good answer, Dion.  I like the "passenger seat" analogy.  For the members, just to make clear the difference in the two royalties, definitions follow:

ROYALTY:    A percentage share of production, or the value derived from production, paid from a producing well.

OVERRIDING ROYALTY:  A percentage share of production, or the value derived from production, which is free of all costs of drilling and producing, and is created by the lessee or working interest owner and paid by the lessee or working interest owner.

• ▶ Reply

Permalink Reply by Andrew on February 11, 2013 at 7:25

Here's a synopsis of the various kinds of "royalty" that might shed light on the confusion. Link

• ▶ Reply

Permalink Reply by John M Starke III on February 11, 2013 at 6:35

Mom had the original mineral deed acquired when my dad was doing land work in the area in 1943.

When Grand Energy wanted a lease in 1998 they were not able to locate my mom who had moved so the Shelby County District Court signed one.After I finally trace the lease to them they told me that the money from mom and others had been pooled and that they were unable to determine how much was hers. So the court just kept it all. We finally got the money about two months ago, after 18 months of hassle.

• ▶ Reply

Permalink Reply by John M Starke III on February 11, 2013 at 6:59

Guess I had better ratify the lease then!

• ▶ Reply

Permalink Reply by Dion Warr, CPL on February 11, 2013 at 8:29

John:

Whoa, hang on...  You said "mineral deed" above.  But you have referred to this in the past as "royalty interest".  Does your mother's interest originate from a mineral deed (which means that she, or your father, or both, executed an oil and gas lease back in the 40's or 50's as well, in which a royalty was to be paid according to the terms and provisions of the lease), or is this strictly a royalty interest?  A mineral deed and a royalty deed are two totally different conveyances, and you end up with different "bundles of sticks" depending upon which deed has ultimately granted you your interest through inheritance.

 

Please don't take this as chiding; I (as well as Andrew above) are both concerned that you seem to be using certain terms interchangeably which are in fact not interchangeable. 

• ▶ Reply