What does 'executive' and 'non executive' mean on a Texas O&G Lease contract? If the person who has executive interest signs the agreement, do the non-executive interests HAVE to sign to receive royalties? Thanks for any comments.
Hi Al!
I am sure one of the Attorneys or one of the more knowledgeable experts on The Forum could answer your question more accurately, but if you are asking about Executive vs. Non-Executive Mineral Rights, to my understanding the holder of the Executive Rights has the authority to negotiate and sign the Lease, not the Non-Executive Interest Owners.
The Non-Executive Mineral Owners might be requested to sign a Ratification of the Lease, perhaps to evidence that they received their share of the Bonus Payment, but even that is not required.
They would, of course, probably be requested to sign Royalty Division Orders before the company disburses any royalties, but in the strictest sense, even that may not an absolute requirement for the payment of royalties.
Having said all of that, if the company wants the Non-Executive Mineral Owners to sign Ratifications and Division Orders, there wouldn't be any harm in that.
Hope this helps -
Charles Emery Tooke III
Certified Professional Landman
Fort Worth, Texas
Be sure to get a copy of the lease or leases which are applicable to your NPRI so you know the terms and conditions.
Charles has provided very good information. I would like to add that if you are a non-executive holder, you should get a copy of the lease and make sure if you are signing any ratification that they are not changing any terms as provided by the original lease. The biggest red flag I know to watch for is when there is an old lease that does not give the right to pool, and the non-executive interest holders are asked to ratify an amendment to the lease authorizing the operator to pool. This needs careful study and review before signing. Sometimes it can work for your benefit and sometimes it will not.
In Texas, there are five elements to the mineral estate:
1. The right to enter into an oil and gas lease (the Executive Right)
2. The right to receive Bonus
3. The right to receive Rental
4. The right to come and enter the property to explore for the minerals
5. A cost free share of production (royalty)
A Non-Executive Mineral Interest is just that. The ENTIRE mineral interest stripped of the right to enter into oil and gas leases. The Non-Executive still gets his share of bonus, rentals, royalty, and the rights of ingress and egress.
A non-executive mineral interest will require the joiner of the non-executive to pool the interests. The reason for this, in Texas, is that the pooling transaction creates a cross conveyance of minerals. The holder of the minerals, or the executive, does not have the right to convey the property of the non-executive.
There COULD be immense harm in the non-executive agreeing to pool his lands with another. Only an examination of the factual situation would reveal that. On the flip side of the coin, it could be in the non-executives favor to ratify a lease as to pooling.
You do not need to ratify a lease to get your share of bonus, rentals or royalties. They will ask you to sign a receipt showing that you received the bonus, but that is all.
You might want to read this blog post:
http://www.mineralrightsforum.com/profiles/blogs/npri-npmi-nonexecu...
Best wishes,
Buddy Cotten