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Oil & Gas Glossary for Mineral Owners

Plain-English explanations of the lease clauses, taxes, and concepts that show up on your deeds, leases, and royalty statements — written for mineral owners, not lawyers.

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Lease Clauses

Habendum Clause The habendum clause is the part of an oil and gas lease that defines its duration: a fixed primary term, follo… Granting Clause The granting clause is the provision in an oil and gas lease that states exactly what the mineral owner convey… Dry Hole Clause A dry hole clause is a lease provision that keeps the lease in effect after a non-productive ("dry") well is d… Surface Use Agreement A surface use agreement (SUA) is a contract that governs how an operator may use the surface to develop the mi… Delay Rentals & Lease Bonus A lease bonus is the one-time, up-front payment a mineral owner receives for signing an oil and gas lease; del…

Core Concepts

Rule of Capture The rule of capture is the legal principle that oil and gas belong to the party who produces them at the surfa… Correlative Rights Doctrine The correlative rights doctrine holds that each owner above a common oil and gas reservoir has a fair opportun… Net Revenue Interest (NRI) Net revenue interest (NRI) is the percentage of production revenue an owner actually receives from a well afte… Upstream, Midstream & Downstream Oil and gas activity is divided into three segments: upstream (finding and producing hydrocarbons), midstream … Allocation & Production-Sharing Wells Allocation wells and production-sharing agreement (PSA) wells are horizontal wells whose production is divided…

Taxes & Deductions

Severance Tax Severance tax is a state tax imposed on oil and gas at the time it is produced (severed) from the ground, typi… Ad Valorem Tax Ad valorem tax is a local property tax assessed on the appraised value of producing mineral interests, billed … Depletion Allowance The depletion allowance is a federal income-tax deduction that lets oil and gas royalty owners recover the gra… Intangible Drilling Costs (IDC) Intangible drilling costs (IDC) are the non-salvageable expenses of drilling and preparing a well — labor, fue…

People & Roles

Landman A landman is a land professional who researches mineral ownership and title, negotiates oil and gas leases, an…

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Disclaimer: Information provided is for educational purposes only and does not constitute legal, tax, or investment advice. Mineral rights transactions involve complex considerations that vary by individual circumstances. Consult with qualified professionals before making any decisions. Buckhead Energy does not provide legal, tax, or investment advice.

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