Royalty Calculation for NPRI

Is the NPRI Fixed or Floating and why?

This can be extremely confusing. It seems if the grantor meant floating they would just say in the deed… They reserve some fraction of the royalty rate. Oh well… You may have to turn your screen sideways, it wouldn’t let me post two separate pics…



Seems to be fixed since it says a “1/12th non-participating royalty interest” (fixed) and not a “1/12th non-participating interest in and to all of the oil and gas royalty” (floating). I will admit the deed reservation language could have been made stronger.

Thanks for your input, the deed has some of the buzz words they use for floating “in and to” and “the usual one-eighth” but the context they are used in seems to imply fixed, we will see if anyone else has thoughts.

Yeah the usual 1/8th thing throws a kink in there for sure. This one’s a bit messy, could go either possibly, but that depends on additional details and interpretations. Any idea if the grantor in that deed owned greater than or equal to a 2/3 undivided mineral interest?

No we actually checked the deed where it was sold to the person who sold it to my grandparents…

I don’t think I answered that very well, as for as we know they did not own any minerals once they sold it to grandpa other then the 1/12 NPRI they requested. We went back and looked at the deed where it was sold to them…

If a good landman was running title, the reservation was for 1/12 NPRI. The document was not complete, so we do not know if there was any language for proportionate reduction.

The requirement for a future lease providing for a royalty of not less than the usual 1/8 is mere surplusage, in my opinion. It is not part of the granting clause and does not serve to modify the reservation. This does not look messy to me.

But sometimes I am not correct.

The entirety of the document is what counts, so that a title examiner can assess the four corners of the agreement to help determine the intent of the parties.


Buddy Cotten

I have the whole document and will post to maybe make it clearer, I can see your point…

Page 1

Page 2

Page 3

Page 4

Page 5

Just an FYI…

They only let me post one picture at a time since I am a new member…

Still looks like a 1/12 NPRI to me.

There is a reason they put the “not less than the usual 1/8 royalty” in the document. That was before we had some good case law on fiduciary (or quasi) relationships between the Lessor and non-executives and NPRI owners.

They sold all of their undivided interest in the lands described.

However, the reservation was to the “lands” and not the “lands conveyed.”

This raises the question of is the 1/12 reduced to the interest conveyed? Clearly, the would be if the reservation was a “1/12 NPRI in the lands conveyed.”

What was conveyed appears to be less than a full interest.

Point being is that there is a world of difference in “lands described herein” and lands conveyed herein."

It is not a stretch for me to say that the 1/12 NPRI is reducible to the undivided interest conveyed. Some might disagree and I understand why. That’s why attorneys who write Division Order Title Opinions get the big bucks.


Buddy Cotten

Thanks for the reply, so if it is considered fixed, how would you calculate my decimal ownership?

I copied the below from another topic you answered:

———————— A NPRI is absorbed by the royalty owner to the extent that it does not exceed their royalty. For example, if the NPRI was 20% and the lease provides for 18.75%, then the lease royalty owner receives nothing and the oil company’s net revenue interest is 80%.

SO, if the NPRI is .0325 and your royalty is .1875, then your share of production would be .1875-.0325= 15.50%. ———————-

My situation is 1/12 or 0.0833333 NPRI and a royalty rate of 1/8 or 0.125 so would this be correct for the fixed NPRI?

0.125 - .08333333 = .0416667 my part?

I just want to be sure, since it is a lot of difference in the NPRI part and my part … :slight_smile:

Thanks! Kathy

If the OGML provides for only a 1/8 royalty, which is equal to 0.125, then yes, the Lessor’s share of leasehold royalty would be 0.125 RI - 0.08333333 NPRI = 0.04166667 RI, assuming this Deed conveyed 100% mineral rights under the entire 187 acres. If less than 100% was conveyed, then the lease royalty is proportionately reduced to what was conveyed to the Youngs.

A division order analyst should rely on the lease title opinion to confirm all of this. If the company doesn’t obtain a lease title opinion from an attorney, the analyst likely will rely on the expressed intent of the parties in this original deed. The NPRI of 0.08333333 would apply to all 187 acres for the purposes of the company’s lease records and division order records, if 100% mineral rights were conveyed. The royalties for any part of that 187 acres placed into a pooled unit would be credited 0.08333333 to the current owners of that NPRI, and the remainder would be distributed to the Youngs or current heirs and assigns of the Youngs as RI. It wouldn’t matter the size of the lease royalty (if greater than 1/8), because this particular language would be treated by a division order analyst as a fixed NPRI.

That said, bear in mind that in Texas if any of the 187 acres are pooled into a unit and those acres are not drillsite tract acreage, the NPRI owner will never receive any royalties unless they ratify either the oil and gas lease or the Declaration of Pooled Unit filed in Wise County. The language in the deed saying the NPRI owner(s) won’t have to sign an OGML doesn’t apply to a contract for pooling (which is what a pooling clause in the lease is).

Thanks so much for the info and to everyone for helping educate me on NPRI.

Two weeks ago I didn’t even know there were two types of NPRI, fixed and floating. Some of the wording differences for each.

Which type was in Grandpa’s deed.

How to calculate both of them… I was really confused on what number you used for total production for fixed. Every calculation I found out on the web, talked about total production and I kept wondering what number do you use for that. Now I know… :))


Oops I have one more question:

If the well isn’t on the 35 acres and the NPRI owner doesn’t ratify, then does that mean the 1/12 NPRI isn’t taken out of our 1/8 royalty interest and we should get paid our full 1/8, or how does that work?

Thanks! Kathy

Courts have held that an NPRI owner can’t be bound by the pooling clause in an oil and gas lease, even though they are not allowed to sign it. Instead, they must ratify the lease if they want to make sure that they will receive their proportionate share of their NPRI if the 35 acres is outside the drillsite but is inside the pooled unit. The alternative is for the NPRI owner to ratify the Designation of Pooled Unit, so they are only committing to allow pooling of their NPRI interest (and have it reduced proportionately by the ratio of the 35 acres to the total unit area) at the specific depth or completion formation covered by the DOPU (Declaration of Pooled Unit). That leaves their 35-acre tract uncommitted for deeper (or shallower) completions, just in case in those new completions the 35-acre tract IS the drillsite tract. Drillsite NPRI get 100% of the tract NPRI (in this case, 0.08333333) without any proportionate reduction at all for the ratio of the 35 acres to the total unit area. The only thing that can reduce it is the amount of mineral interest out of which it was carved (how much mineral interest was owned by the Allens when they reserved the NPRI).

It works like this: An NPRI owner can’t be bound by the pooling clause unless they agree to be bound, as stated above. If they fail to ratify the lease or to ratify the DOPU, and the 35 acres is not the drillsite, the NPRI interest is not considered pooled because the NPRI owner didn’t sign an agreement recognizing the pooling. So the 35-acre tract only as to the NPRI ownership in it, is considered non-pooled, so it is “non-producing”, so it won’t ever be entitled to any royalty at all.