Need help understanding royalty interest

General Mineral Rights Discussion
1

Finally, I think that I have found a place where I can get some questions answered.

My father accumulated several royalty interests over the years. He knew the ins and outs of the oil business but now that he is gone no one in the family has the knowledge necessary to make any decisions. My interests are in Edwards and Hamilton County IL. and Henderson County, Ky

1. It is my understanding that as a royalty interest holder I have no say in the lease and get no lease money. I only get money if a well produces on the land. Is this correct?

2. Exactly who does control the leasing of the rights?

3. If as a royalty interest holder I do not have to be contacted for a producer to come in to drill how would I know if any activity was going on. What kind of system is in place to insure that division orders will be properly executed to include royalty interest holders like me.

4. The Hamilton County property has no wells at this time. However, I understand that there has been a lot of leasing activity there in the last few months. I don't know if anyone has executed any leases on my properties. My mom was contacted recently by someone who was interested in purchasing her interests and I don't know which ones he was after but I expect it is the Hamilton County. Since there is not a producer on the property I don't think he will offer much. Does anyone know what is going on with the Hamilton County activity. We are trying to keep these people away from mom. She is competent but could easily be talked in to signing away her rights to a "folksy non pushy guy who doesn't seem to care much if she sells to him or not and seems like a nice guy" (Her description of the guy who called her).

I'm thinking that we would be foolish to give up any mineral rights since there is the possibility of horizontal drilling production or a silurian reef being found on these properties.

Thanks for any help you can give me.

2

1. Do you on a NPRI? Trying to determine if you own a royalty interest or a mineral interest.

2. The owner of the executive rights will have the right to negotiate and execute leases

3. Operators are legal bound to pay interest holders, so they will contact you.

If time is on your side, holding mineral interest is usually your best option (Of course that depends on your financial situation)

3

All of the division orders I looked at refer to it as Royalty Interest. I see on the leases statement, "It is the intention to convey XXRoyalty acre(s)." One of the properties has no producing wells. Others have small production stripper wells. Insignificant income - just worth hanging onto in case new drilling occurs.

4

Reagan, Thanks for pitching in. I am new here - but learning as I go. Is it true in every case that operators are legally bound to pay interest?

5

1. Correct IF your royalty interest is an NPRI.

2. Whoever owns the "executive rights" is entitled to lease the minerals. Usually, the mineral owner also owns the executive rights, but if the minerals have been severed it is not uncommon for the surface owner to own the executive rights, in which case the mineral owner has a Non-Executive Mineral Interest (NEMI).

3. You would know if any activity were going on because with successful production you would have to been contacted to sign a Division Order and process payment. "The law" is in place to "ensure" all royalty owners get paid, although as with any law, just because it's in writing does not mean everybody obeys it.