Can someone explain the difference between a Drilling Unit and a Produciton Unit, and how once those are establsihed, the royalty would be calculated?
In a real life example, it looks like a Drilling Unit is larger than a Produciton Unit and the Production Unit can be reduced to meet certain spacing rules.
Lets assume that there are two abstracts of 640 acres each in the Drilling unit. Now lets assume that one individual owns 100% of the minerals on 10 acres on the far north edge of the drilling unit. At time of drilling they would own 10/1280 subject to whatever royalty they negotiated in their lease.
Now the operator forms a producton unit of say 900 acres and that produciton is not on top of the 10 acres. Is this individual cut out of any royalty?
Thanks in advance for explaining this.