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I would appreciate some help in clarifying what I own and the relevant terms and calculations.
In 1929, my grandparents bought a farm in west Texas (Permian), 160 acres (SW/4 of section X, block Y,, ...)
After they divorced, they sold the land by warranty deed, but retained some interest:
"[grandmother] reserves unto herself an undivided one-fourth interest in and to all oil, gas and other mineral royalties which may be paid for oil, gas or other minerals produced on or from the above described land."
Same for grandfather.
QUESTION 1: The reserved interest is royalty interest. Would it be called NPRI today?
Grandfather's portion got passed down to my dad and his many siblings via will.
Grandmothers portion got passed down to my dad and his many siblings via Royalty Deed.
So my dad's share came to .042
My dad QCDed me his royalty interest to me.
I am interested in selling it. [I will be consulting a lawyer but would like some basic understanding now.]
The land is under lease at 3/16 royalty rate.
A deed would state something like:
.042....SW/4, section 13,....
However, potential buyers (and the county tax authority) are interested in the number: .042 x 3/16 = .0079
My Dad's QCD got those two numbers mixed up, so I need distinct terms to refer to these two numbers when describing the issue. (He has since passed on, so he can't just write a new QCD. Yes, I will be consulting an attorney.)
QUESTION 2:
a) What is the number .042 called? The interest, correct? (a word which seems to be used for various numbers).
Please if there is a merciful God, can someone give me an industry-standard term for this number? Hopefully not "decimal" as in "a decimal of .042" or interest, as in "a 0.42 interest" but something more specific, BECAUSE, the words "decimal" and "interest" are also used for:
The number .0079 is the decimal interest (in the county tax rolls it is called Owner Decimal or Ownership Decimal.)
So, in this calculation:
.042 x 3/16 = .0079
?? x royalty rate = decimal interest
b) Also, I asked for clarification on an offer as to what they are buying, and they responded "It is a NPRI interest with decimal of .0079." Don't I own an NPRI of .042?
QUESTION 3:
I am told that buyers think in terms of Net Mineral Acres...?
I was given a tip about the going dollar figure per NMA when the royalty rate is 3/16.
a) In the south-half (80 acres), my interest is undivided over the 80 acres. So, wouldn't the calculation be:
.042 x 80 acres = 3.36
What is 6.72 called? net acres? net mineral acres? royalty acres?
b) The north half (80 acres) has a pooled unit with the State of Tx due to a highway ROW of a few acres, so that my ownership is actually factored by .96 (tract participation factor?)
So then,
.042 x .96 x 80 acres = 3.23
What is 3.23 called? net acres? net mineral acres? royalty acres?
QUESTION 4:
Any thoughts on whether I should use an O&G attorney in Austin, where I can come in person, or in Midland, where they would perhaps have their "finger on the pulse" a bit more?
Thanks very much for any information!
Keywords:
Regina, he was agreeing with me from my last comment. I was stating that an NPRI cannot go shopping the lease because they don't have the rights to do so. It is a piggy-back arrangement. You are correct that if production keeps the lease in effect, you are stuck with the royalty rates, as well as it's terms, which are probably outdated in today's world of post production costs, etc.
Dear Ms. Lauderdale,
You own a NPRI of .042 of royalty. Non Participating Royalty Interests can be created as a fixed amount, or a floating amount (based on the lease royalty). BUT, your interest is a NPRI of .042 of royalty. Many professionals would express your interest as "an NPRI of .042 with a revenue interest in production of .0079." The difference between fixed and floating is in the language, for example:
"Reserving, as a non participating royalty interest, 1/16 of production from ......" That is fixed royalty.
"Reserving, as a non participating royalty interest, 1/16 of the oil and or gas royalties...." That would be floating royalty.
Do not begin to confuse yourself with net mineral acres. You own no mineral acres. You own no minerals. You have a non possessory interest in production, nothing more. There is something called royalty acres, which to many is very confusing. A royalty acre is defined as the full 1/8 landowner royalty in one acre. Therefore, there are 8 royalty acres to each mineral acre. The 3.23 means nothing. It is non existent. It is the result of multiplying two numbers together that together have no relevance.
Best,
Buddy, i agree with you, but i was trying to help her understand where the .042 came from. Lots of court cases about these NPRI's.
Dear Mr. Cotton,
Thank you very much for your post. Very helpful.
Regina
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