I am in the homework stage of signing an oil lease and have a question about the wording in the deed concerning royalty interest.
My grandfather was one of nine children. In 1952, my grandfather’s 8 siblings sold their part of the 160 acre farm to my grandfather for $10. They did however keep a portion of the mineral royalty interest. The wording on the deed to my grandfather is as follows:
Grantors reserve from this conveyance and to themselves, their heirs and assigns, in accordance to the interest owned by them in said land, an undivided one-sixteenth (1/16th) nonparticipating royalty interest in and to the oil, gas and other minerals that may be produced from said tract of land.
I now own 100% of the 160 surface acreage along with the remainder of the mineral acreage per the wording from the deed above.
Does the wording specify that each sibling received a 1/16th mineral royalty interest (8 siblings x 1/16 = 1/2 or 50% royalty interest) or does it mean that all eight siblings share a 1/16th royalty interest for a total of 6.25%?
With them having a nonparticipating interest, I realize I would own all 160 net mineral acres as far as bonus payment is concerned. As far as royalty interest, do I have 50% or 93.75% interest?
If all the siblings signed the same instrument, then they reserved on a best case (for you) scenario 8/9 x 1/16 NPRI. If they did not sign the same instrument, but different instruments, in my opinion, the working "in accordance to the interest owned by them in said land" serves to proportionately reduce the reservation to their interest and the math works out the same, i.e. a total reservation of 8/9 x 1/16 NPRI, or a percentage interest of 5.55555%.
IF you leased the lands for a 20% royalty, your net share of royalty would be 20% less 5.55555%, or 14.444445%.
Any or all of this could change by an examination of all documents contained within the chain of title, such as great grandmom and great grand dad owning less than 100% of the minerals.
All 8 of his siblings and their spouses signed the instrument as well as attached individual joint acknowledgment forms.
I'm not quite following you. Assuming that 100% of the mineral rights were passed down from previous generations (which they have) and let's assume (to keep the math easier) that the oil company gives me a lease with 100% royalty, according to the wording, do the 8 siblings (not including my grandfather) split 1/16th royalty interest or share a 1/16th royalty interest? My grandfather would have received the remaining royalty interest. What percentage he received according to the wording is my question (50% or 93.75%).
Your great grandfather had 9 kids. Each child owned 1/9th of the property.
8 of those conveyed the surface and minerals and reserved a 1/16 NPRI, in accordance with the interest owned by them (1/9 each). Therefore, the most collective royalty that they reserved was 5.55555% - regardless of what the royalty on the lease might have provided.
For example, if the lease provided for a 1/8 royalty (12.5%), then they are entitled to 5.555555%. If the lease provided for 25% royalty, they are entitled to 5.55555%. Their interest is a fixed interest in production, not a floating interest based on what royalty you negotiated for in the lease.
If he lease provided for 100% royalty, then they are still entitled to 5.5555% of production.