Understanding This Unique Type of Mineral Ownership
NPRIs are one of the more confusing types of mineral interests. This guide explains what an NPRI is, how it differs from other interests, and what it means for you as an owner.
A Non-Participating Royalty Interest (NPRI) is a type of mineral interest that entitles you to a share of production revenue—but nothing else.
The "non-participating" part means you don't participate in lease decisions. You can't:
Negotiate or sign oil and gas leases
Receive lease bonus payments
Receive delay rental payments
Control who operates on the property
What you do receive is your share of production royalties when oil or gas is produced. This makes an NPRI a passive interest—you receive income when there's production, but have no control over whether or when that happens.
What you get: Share of production royalties
What you don't get: Lease bonus, delay rentals
Control: None over leasing decisions
Can you sell: Yes
NPRIs don't occur naturally—they're created when someone carves out a royalty interest from full mineral ownership.
A mineral owner sells their minerals but reserves an NPRI for themselves. The buyer gets the executive rights (ability to lease) plus a reduced royalty, while the seller keeps a perpetual royalty stream.
A grandparent deeds minerals to a child but reserves an NPRI during their lifetime, or creates NPRIs for multiple grandchildren while leaving executive rights with one person.
When estates are divided, sometimes one heir receives the executive rights while others receive NPRIs—perhaps because one heir lives locally and can manage leasing decisions.
NPRIs became common in Texas in the early 1900s when landowners sold surface land but wanted to retain mineral income. They've since been used in various estate planning and transaction structures.
| Right/Benefit | Full Mineral Rights | NPRI | ORRI | Royalty Interest |
|---|---|---|---|---|
| Receive royalties | ||||
| Negotiate/sign leases | Varies | |||
| Receive bonus payments | Varies | |||
| Perpetual (no expiration) | ||||
| Can be sold |
While both NPRIs and ORRIs provide royalty income without executive rights, there's a crucial difference: NPRIs are perpetual while ORRIs expire when the lease expires. An NPRI continues forever through all future leases, while an ORRI disappears if the lease terminates.
Full mineral rights include the "executive right"—the power to lease. NPRI owners are dependent on whoever holds the executive rights to negotiate favorable lease terms. If the executive rights holder accepts a low royalty rate, the NPRI owner is stuck with their share of that lower rate.
Not all NPRIs are created equal. The specific language in the document that created your NPRI determines exactly what you own.
What fraction do you own? Your NPRI will be expressed as a fraction (like 1/16 or 1/32) of production.
Is it "fixed" or "floating"? A fixed NPRI stays the same regardless of lease terms. A floating NPRI adjusts based on the royalty rate in the lease.
Does it apply to all depths? Some NPRIs are limited to specific formations or depths.
Is there a pooling provision? This affects how your NPRI is calculated when wells are drilled on units that include your land.
This is one of the most important distinctions:
You receive a set fraction of production (e.g., 1/16) regardless of what royalty rate is in the lease. If the lease royalty is 25%, you still get your 1/16.
Your share is calculated as a fraction of the lease royalty. If you have a 1/2 NPRI of the royalty and the lease is 20%, you get 10% (half of 20%).
The specific language in your deed or conveyance document controls. If you're unsure what type of NPRI you have, the original document needs to be reviewed. Courts have interpreted similar language differently, making precise wording critical.
Passive income: No decisions to make—just collect royalties
Perpetual: Unlike ORRIs, NPRIs last forever
No cost obligations: You don't pay for drilling or operating
Transferable: Can be sold, gifted, or inherited
Simple: No need to evaluate lease offers or make decisions
No control: Can't negotiate lease terms or timing
No bonus: Miss out on upfront lease bonus payments
Dependent on others: Rely on executive rights holder's decisions
Potential conflicts: Executive holder's interests may differ from yours
Generally lower value: Worth less than equivalent mineral rights due to lack of control
NPRI values depend on current production, future potential, location, and the specific terms of your interest. Generally, NPRIs are worth somewhat less than equivalent mineral rights because of the lack of control and bonus rights. A professional evaluation considering your specific circumstances is the best way to determine value.
Not directly—the executive rights are owned by someone else. However, you could potentially purchase the executive rights from whoever owns them, which would give you complete mineral ownership. This requires a willing seller and agreeable terms.
If there's no lease and no production, you won't receive any payments. Your NPRI only generates income when oil or gas is actually produced. This is one risk of NPRI ownership—you have no control over whether the executive rights holder chooses to lease, and if they don't, you receive nothing.
Yes, royalty income from NPRIs is taxable. You may be eligible for depletion deductions that can reduce your taxable income. Tax treatment varies by situation, so consult with a tax professional familiar with oil and gas taxation for advice specific to your circumstances.
Get a free evaluation and understand your options
Buckhead Energy purchases NPRI interests throughout the major oil and gas producing states. We can help you understand exactly what you own and provide a fair offer if you're interested in selling.
Disclaimer: This information is provided for educational purposes only and does not constitute legal or tax advice. NPRI terms and interpretation vary based on specific conveyance language and state law. Consult with qualified professionals for advice specific to your situation.