The Oil & Gas Encyclopedia for Mineral Owners

Quick Answer The Buckhead Energy Oil & Gas Encyclopedia explains 209 terms mineral and royalty owners run into on deeds, leases, division orders, and royalty statements — lease clauses, royalty and title concepts, taxes, and the vocabulary of selling. Each term is a standalone, plain-English explainer written for owners rather than lawyers.

Rule of Capture The rule of capture is the foundational property doctrine of American oil and gas law: a landowner who drills … Correlative-Rights Doctrine The correlative-rights doctrine is the companion limit to the rule of capture: every owner of an interest in a… Oil and Gas Law Oil and gas law is the body of property, contract, and regulatory law that governs the ownership, leasing, exp… Accommodation Doctrine The accommodation doctrine is a rule of oil and gas law that limits the dominant mineral estate: when the mine… Implied Covenants in an Oil and Gas Lease Implied covenants are obligations that courts read into an oil and gas lease even though they are not written …

Habendum Clause The habendum clause — often called the "term clause" — is the provision in an oil and gas lease that fixes how… Shut-In Clause A shut-in clause (or shut-in royalty clause) is a provision in an oil and gas lease that allows the lessee to … Oil and Gas Lease Clauses Oil and gas lease clauses are the individual provisions that make up an oil and gas lease, each governing a sp… 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… Held by Production (HBP) Held by production (HBP) is the status of an oil and gas lease that has extended past its fixed primary term a… Top Lease A top lease is a new oil and gas lease that a party takes on a tract while an existing (bottom) lease is still… Entireties Clause An entireties clause is a provision in an oil and gas lease that directs how royalty is apportioned among owne… Pooling Pooling is the combining of separately owned mineral tracts into a single drilling unit so that one well can d… Farmout Agreement A farmout agreement is a contract in which the owner of an oil and gas lease (the farmor) lets another party (… Forced Pooling Forced pooling — also called compulsory or statutory pooling — is a process in which a state oil and gas regul… Drilling and Spacing Unit A drilling and spacing unit is the defined area of land that a state oil and gas regulator assigns to a well t… Retained Acreage Clause A retained acreage clause (often paired with a continuous development clause) provides that when the primary t… Proportionate Reduction Clause A proportionate reduction clause — also called a lesser interest clause — provides that if the lessor owns les… Force Majeure in an Oil and Gas Lease A force majeure clause in an oil and gas lease excuses or suspends the lessee's performance — and can keep the… Cessation of Production Clause A cessation of production clause is a lease provision that keeps the lease from automatically terminating when… Unitization Unitization is the combination of many separately owned tracts or leases overlying a common reservoir into a s… Most Favored Nations Clause A most favored nations clause (also called a favored nations clause) in an oil and gas lease is a provision gu… Plugging and Abandonment (P&A) Plugging and abandonment (P&A) is the regulated process of permanently sealing a well that has reached the end… Proration Unit A proration unit is the acreage a state regulator assigns to a well for the purpose of setting its allowable —… Gas Balancing Gas balancing is the process of settling gas imbalances that arise when co-owners of a gas well take and sell … Workover A workover is a maintenance, repair, or enhancement operation performed on an existing well — such as replacin… Warranty Clause A warranty clause in an oil and gas lease is the lessor's promise that they hold good title to the leased mine… Pooling Clause A pooling clause is the lease provision that gives the lessee the right to combine (pool) the leased land with… Offset Wells and Drainage Drainage occurs when a well on neighboring land produces oil or gas that migrates from beneath your tract, eff… Saltwater Disposal Well (SWD) A saltwater disposal well (SWD) is a well used to inject the large volumes of salty, mineral-laden water that … Spacing Exception A spacing exception is regulatory permission to drill a well closer to a lease or property line, or to another… Take-or-Pay A take-or-pay clause is a provision in a natural gas purchase contract that requires the buyer (typically a pi… Oil and Gas Lease Extension An oil and gas lease extension is an agreement that gives the lessee additional time — beyond the original pri… Surface Damage Payments Surface damage payments are compensation paid to the owner of the surface estate for the disturbance and loss …

Depletion Allowance The depletion allowance is a federal income-tax topic that treats an oil and gas mineral or royalty interest a… Oil and Gas Tax Deductions Oil and gas tax deductions are the federal income-tax deductions available to owners of oil and gas interests … 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 … Intangible Drilling Costs (IDC) Intangible drilling costs (IDC) are the non-salvageable expenses of drilling and preparing a well — labor, fue… 1031 Exchange (Mineral Rights) A 1031 exchange is a provision of the U.S. tax code that some owners of investment real property — including, … Mineral Rights in an IRA A self-directed IRA is a retirement account that can hold alternative assets — including oil and gas mineral a… Capital Gains Tax on Selling Mineral Rights When you sell mineral rights, the profit is generally treated as a capital gain rather than ordinary income, a…

Split Estate A split estate (or severed estate) exists when the surface of a tract of land and the oil, gas, and minerals b… Surface Rights Surface rights are the rights to own, occupy, and use the surface of a tract of land — to farm it, build on it… Types of Mineral and Royalty Interests Oil and gas interests come in several distinct types — the mineral interest, the landowner royalty interest, t… History of Mineral Rights The history of mineral rights in the United States traces how ownership of underground oil and gas evolved fro… Subsurface Rights Subsurface rights are the rights to the substances and the space beneath the surface of a tract of land — a br… Water Rights Water rights are the legal rights to use water — both surface water (rivers, lakes) and groundwater (water ben… Mineral Rights by State Mineral rights in the United States are governed primarily by state law, so the rules that most affect owners … Executive Rights The executive right is the power to lease a mineral interest — the authority to negotiate, execute, and bind t… Non-Executive Mineral Interest A non-executive mineral interest (NEMI) is a mineral interest that has been stripped of the executive right — … Mineral Rights vs. Royalty Interest Mineral rights are ownership of the minerals themselves — including the right to lease, and to receive bonus, … Proving Mineral Ownership You prove mineral ownership by tracing the chain of title in the county records where the minerals sit — the r… Transferring Mineral Rights You transfer mineral rights by executing the correct instrument — a mineral deed for a sale or gift, or probat… Comparing Mineral Rights Offers Comparing mineral rights offers means weighing more than the top-line price — confirming exactly what interest… Selling Mineral Rights: Pros & Cons Selling mineral rights trades uncertain future royalty income for a lump sum today; the pros include certainty… Working Interest A working interest is the operating ownership share in an oil and gas lease: it carries the right to explore, … Mineral Deed A mineral deed is a recorded legal instrument that conveys ownership of the minerals beneath a tract of land —… Do Mineral Rights Expire? Mineral rights generally do not expire on their own — a severed mineral interest is permanent property that pa… Price Per Acre for Mineral Rights There is no meaningful single "average price per acre" for mineral rights, because value depends far more on p… Unclaimed Mineral Rights Unclaimed mineral rights are severed mineral interests an owner has lost track of, and unclaimed royalties are… Finding Oil on Your Land To find out whether your land has oil or gas, you check three things: whether you actually own the mineral rig… Estate Planning for Mineral Rights Estate planning for mineral rights is arranging how your minerals pass at death — through wills, trusts, or en… Buying Land Without Mineral Rights Buying land without mineral rights means purchasing the surface of a property whose minerals were previously s… Fee Simple Mineral Rights Fee simple mineral rights are the most complete form of mineral ownership — holding the full mineral estate ou… Reversionary Interest A reversionary interest is a future interest that vests in its holder upon a later event — most often a term m… Undivided Interest An undivided mineral interest is ownership of a fractional share in the whole of a tract's minerals rather tha… Donating Mineral Rights Donating mineral rights means conveying an oil and gas mineral or royalty interest to a charity, church, unive… Risks of Owning Mineral Rights Owning mineral rights carries real risks — royalty income falls as wells deplete, commodity prices swing, oper… Mineral Rights Documents Explained The paperwork of mineral ownership comes down to a handful of documents — the mineral deed that conveys title,… Mineral Interest vs. Wellbore-Only Interest A wellbore-only interest is a royalty or mineral interest limited to production from one specific existing wel… Tax Forms for Mineral & Royalty Owners Mineral and royalty owners typically encounter tax paperwork around their royalty income and around a sale of … Allocation Wells An allocation well is a horizontal well that crosses two or more separately-owned tracts without forming a poo… Mother Hubbard Clause A Mother Hubbard clause — also called a cover-all or catch-all clause — is oil-and-gas lease language that aut… Osage Headrights A headright is a share in the communal mineral estate of the Osage Nation: under the 1906 Osage Allotment Act,… Non-Participating Royalty Interest (NPRI) A non-participating royalty interest (NPRI) is a share of oil and gas production, free of the costs of drillin… Fixed vs. Floating NPRI A fixed non-participating royalty interest is a set fraction of total production that does not change regardle… Non-Operated Working Interest A non-operated working interest is an ownership stake in an oil and gas well or lease that bears its proportio… Overriding Royalty Interest (ORRI) An overriding royalty interest (ORRI) is a cost-free share of production carved out of the working interest (t… Payout Payout is the point at which the revenue from a well has repaid the costs of drilling, completing, and operati… Escheatment of Mineral Rights Escheatment is the process by which unclaimed mineral royalties and, in some cases, mineral interests are turn… Louisiana Mineral Servitude A Louisiana mineral servitude is the right to explore for and produce minerals from another's land, created wh… Anti-Washout Clause An anti-washout clause is a provision protecting an overriding royalty interest (or similar carved interest) f… Net Mineral Acres (NMA) Net mineral acres (NMA) measure how much of a mineral estate you actually own: the gross surface acreage of a … Net Royalty Acres (NRA) Net royalty acres (NRA) express a royalty interest in a way that can be compared regardless of the lease royal… Dormant Mineral Act A dormant mineral act is a state statute providing that a severed mineral interest which has been unused and u… Net Profits Interest (NPI) A net profits interest (NPI) is a share of the net profit from an oil and gas property — the revenue remaining… Production Payment A production payment is a cost-free right to a share of production, or the proceeds of production, from an oil… Carried Interest A carried interest in oil and gas is a working interest whose share of costs is paid (or advanced) by another … Gross vs. Net Acres Gross acres are the total surface acreage of a tract, lease, or unit, while net acres are the portion attribut… Unleased Mineral Interest An unleased mineral interest is a mineral interest that is not subject to an oil and gas lease, so the owner h… Depth Severance Depth severance is the division of mineral ownership by depth or geologic formation rather than by surface are… Coalbed Methane Ownership Coalbed methane ownership is the question of which severed estate — the coal estate or the oil and gas estate …

Upstream Oil and Gas Upstream oil and gas — also called exploration and production, or "E&P" — is the segment of the industry that … Midstream Oil and Gas Midstream oil and gas is the segment of the industry that links the wellhead to the market: gathering the oil … Landman A landman is a land professional who researches mineral ownership and title, negotiates oil and gas leases, an… Mineral Rights Broker A mineral rights broker is an intermediary who markets a mineral or royalty interest to potential buyers on th… Downstream Oil & Gas Downstream oil and gas is the final segment of the industry: refining crude oil and processing natural gas int… Integrated Oil & Gas An integrated oil and gas company is one that operates across the full value chain — upstream exploration and … Petroleum Petroleum is a naturally occurring liquid mixture of hydrocarbons — crude oil, along with the natural gas ofte… Natural Gas Natural gas is a naturally occurring mixture of hydrocarbon gases — primarily methane — produced from undergro… Unconventional Oil & Gas Unconventional oil and gas is hydrocarbon production from low-permeability "tight" rock — most notably shale —… Oil & Gas Production Oil and gas production is the phase in which a completed well brings hydrocarbons to the surface, where they a… Decline Curve A decline curve is the graph of how a well's production rate falls over time, typically declining steeply in t… Proved Developed Producing (PDP) Proved developed producing (PDP) reserves are the oil and gas expected to be recovered from wells that already… Enhanced Oil Recovery (EOR) Enhanced oil recovery (EOR) refers to techniques — such as waterflooding, gas or carbon-dioxide injection, and… Horizontal Drilling Horizontal drilling is the technique of drilling a well vertically to a target depth and then steering the wel… Oil and Gas Reserves Oil and gas reserves are the quantities of oil and gas that are expected to be economically recovered from kno… Type Curve A type curve is a representative production profile — an averaged or characteristic decline curve — built from… Natural Gas Liquids (NGLs) Natural gas liquids (NGLs) are the heavier hydrocarbon components — ethane, propane, butanes, and natural gaso… Barrel of Oil Equivalent (BOE) A barrel of oil equivalent (BOE) is a unit that converts natural gas volumes into the energy equivalent of a b… Estimated Ultimate Recovery (EUR) Estimated ultimate recovery (EUR) is the total quantity of oil and gas a well or field is expected to produce … Hydraulic Fracturing Hydraulic fracturing — commonly called fracking — is a well-completion technique in which fluid and a proppant… Spud Date To spud a well means to begin drilling it, and the spud date is the day drilling operations start — an importa… Canadian Royalty Trusts Canadian royalty trusts — nicknamed "canroys" — were publicly traded investment vehicles that held interests i… Coalbed Methane (CBM) Coalbed methane (CBM, also called coal-seam gas or coalbed gas) is natural gas — mostly methane — that is held…

Division Order A division order is a document an oil and gas operator sends to each owner in a producing well that states the… Oil and Gas Royalties An oil and gas royalty is the share of production, or of the value of production, that a mineral owner reserve… Calculating Oil and Gas Royalty Payments An oil and gas royalty payment is calculated by finding your decimal interest — your net mineral acres in the … Net Revenue Interest (NRI) Net revenue interest (NRI) is the percentage of production revenue an owner actually receives from a well afte… Allocation & Production-Sharing Wells Allocation wells and production-sharing agreement (PSA) wells are horizontal wells whose production is divided… Declining Royalty Check A royalty check goes down mainly because of natural production decline as a well ages, changes in oil and gas … Reading a Division Order A division order is a document from the operator that states the decimal interest it will use to pay your shar… Shut-In Royalty A shut-in royalty is a payment an operator makes to a mineral owner to keep an oil and gas lease in force when… Post-Production Costs Post-production costs are the expenses of making oil and gas marketable after it leaves the wellhead — gatheri… When a Well Stops Producing When a well stops producing, royalty payments from it stop; whether your minerals stay leased depends on wheth… Royalty in Suspense Royalty in suspense means an operator is holding your royalty payments rather than sending them, usually becau… How to Read Your Royalty Check An oil and gas royalty check is accompanied by a check detail (or remittance statement) that itemizes, for eac… Basis Differential A basis differential is the difference between the price oil or gas receives at a particular location — such a… Do I Have to Sign a Division Order? A division order is a document an operator sends confirming your decimal interest in a well so it can pay you,… Royalty in Kind A royalty in kind is a royalty paid to the owner as a physical share of the produced oil or gas itself — which… Market Value vs. Proceeds Royalty Market value versus proceeds refers to the two basic ways an oil and gas lease sets the value on which your ro…

Largest Oil and Gas Fields in the United States The largest oil and gas fields in the United States are dominated by the Permian Basin's Spraberry field, the … Permian Basin Production Numbers The Permian Basin of West Texas and southeastern New Mexico is the most productive oil region in the United St…

Mineral Rights in Texas Mineral rights in Texas are governed by Texas property and oil-and-gas law and regulated by the Railroad Commi… Mineral Rights in Oklahoma Mineral rights in Oklahoma are governed by Oklahoma property and oil-and-gas law and regulated by the Oklahoma… Mineral Rights in New Mexico Mineral rights in New Mexico are governed by New Mexico property and oil-and-gas law and regulated by the New … Mineral Rights in North Dakota Mineral rights in North Dakota are governed by North Dakota property and oil-and-gas law and regulated by the … Mineral Rights in Pennsylvania Mineral rights in Pennsylvania are governed by Pennsylvania property and oil-and-gas law and regulated by the … Mineral Rights in Ohio Mineral rights in Ohio are governed by Ohio property and oil and gas law and regulated by the Ohio Department … Mineral Rights in West Virginia Mineral rights in West Virginia are governed by West Virginia property and oil and gas law and regulated by th… Mineral Rights in Kentucky Mineral rights in Kentucky are governed by Kentucky property and oil and gas law and regulated by the Kentucky… Mineral Rights in Colorado Mineral rights in Colorado are governed by Colorado property and oil and gas law and regulated by the Colorado… Mineral Rights in Wyoming Mineral rights in Wyoming are governed by Wyoming property and oil and gas law and regulated by the Wyoming Oi… Mineral Rights in Montana Mineral rights in Montana are governed by Montana property and oil and gas law and regulated by the Montana Bo… Mineral Rights in Utah Mineral rights in Utah are governed by Utah property and oil and gas law and regulated by the Utah Division of… Mineral Rights in Kansas Mineral rights in Kansas are governed by Kansas property and oil and gas law and regulated by the Kansas Corpo… Mineral Rights in Arkansas Mineral rights in Arkansas are governed by Arkansas property and oil and gas law and regulated by the Arkansas… Mineral Rights in Mississippi Mineral rights in Mississippi are governed by Mississippi property and oil and gas law and regulated by the Mi… Mineral Rights in Alabama Mineral rights in Alabama are governed by Alabama property and oil and gas law and regulated by the State Oil … Mineral Rights in Louisiana Mineral rights in Louisiana are governed by Louisiana property and oil and gas law and regulated by the Louisi… Mineral Rights in Michigan Mineral rights in Michigan are governed by Michigan property and oil and gas law and regulated by the Michigan… Mineral Rights in Indiana Mineral rights in Indiana are governed by Indiana property and oil and gas law and regulated by the Indiana De… Mineral Rights in Illinois Mineral rights in Illinois are governed by Illinois property and oil and gas law and regulated by the Illinois… Mineral Rights in California Mineral rights in California are governed by California property and oil and gas law and regulated by the Cali… Mineral Rights in Tennessee Mineral rights in Tennessee are governed by Tennessee property and oil and gas law and regulated by the Tennes… Mineral Rights in Nebraska Mineral rights in Nebraska are governed by Nebraska property and oil and gas law and regulated by the Nebraska… Mineral Rights in South Dakota Mineral rights in South Dakota are governed by South Dakota property and oil and gas law and regulated by the … Mineral Rights in Virginia Mineral rights in Virginia are governed by Virginia property and oil and gas law and regulated by the Virginia… Mineral Rights in Florida Mineral rights in Florida are governed by Florida property and oil and gas law and regulated by the Florida De… Mineral Rights in New York Mineral rights in New York are governed by New York property and oil and gas law and regulated by the New York… Mineral Rights in Alaska Mineral rights in Alaska are governed by Alaska property and oil and gas law and regulated by the Alaska Oil a…

Affidavit of Heirship An affidavit of heirship is a sworn, recorded statement that identifies the legal heirs of a person who died —… Chain of Title A chain of title is the chronological series of recorded instruments — deeds, wills, leases, assignments, and … Quiet Title Action A quiet title action is a lawsuit that asks a court to confirm a party's ownership of real property — includin… Warranty Deed vs. Quitclaim Deed A warranty deed conveys mineral rights with a promise that the grantor holds good title and will defend it; a … Title Opinion A title opinion is an attorney's written examination of the chain of title to a tract, stating who owns the mi… Duhig Rule The Duhig rule is a title-construction doctrine holding that when a grantor conveys land by warranty deed and … Marketable vs. Defensible Title Marketable title is title so free from reasonable doubt that a prudent, well-informed buyer would accept it wi… Fractional Undivided Interest A fractional undivided interest in mineral rights means that a co-owner holds a stated fraction of an entire m… Term Mineral Deed A term mineral deed conveys or reserves a mineral interest for a limited duration rather than forever — typica… Curative Title Curative title work is the process of clearing defects in a mineral title's chain — such as an unprobated deat… After-Acquired Title After-acquired title is a doctrine — a form of estoppel by deed — under which a grantor who conveys an interes… Adverse Possession of Mineral Rights Adverse possession of mineral rights is the claim of ownership of a mineral estate through open, hostile, and … Ratification in Oil and Gas A ratification in oil and gas is a written, usually recorded instrument by which a party adopts and confirms a… Stipulation of Interest A stipulation of interest is a recorded agreement among the owners of a mineral tract that fixes and confirms … Division Order Title Opinion A division order title opinion (DOTO) is a title opinion an operator obtains after a well is completed to dete… Drilling Title Opinion A drilling title opinion (also called an original or leasehold title opinion) is a title examination an operat… Public Land Survey System (PLSS) The Public Land Survey System (PLSS) is the rectangular land-survey grid used across most of the United States…

Joint Interest Billing (JIB) A joint interest billing (JIB) is the periodic invoice an operator sends each non-operating working-interest o…

Pugh Clause A Pugh clause is an oil and gas lease provision that, at the end of the primary term, releases the portions of…

Mineral Rights for Sale Mineral rights for sale are ownership interests in the oil, gas, and minerals beneath a tract that the owner i… Oil & Gas Royalties for Sale Oil and gas royalties for sale are the right to a share of production revenue from a well or lease that the ow… Should You Never Sell Your Mineral Rights? "Never sell your mineral rights" is a common piece of advice rooted in a real truth — minerals can hold long-t… Selling Mineral Rights Held in a Trust Mineral rights held in a trust can be sold — the trustee, acting under the authority the trust grants, signs t… Selling Small Mineral Interests A small mineral interest — a fractional, non-producing, or low-royalty position that pays little or nothing ea… Purchase and Sale Agreement (Mineral Rights) A purchase and sale agreement (PSA) is the contract that governs the sale of mineral or royalty rights — it fi… Lease Offer vs. Purchase Offer When a lease offer and a purchase offer land on the same minerals at the same time, they are not two versions … Mineral Rights Offer Deadlines A short deadline on a mineral rights purchase offer — 10 days, 15 days, "this week only" — is almost always a … Selling Mineral Rights With Unclear Title You can usually sell mineral rights even when the title is not yet clean — a deceased co-owner, an unrecorded … Backing Out of a Mineral Rights Sale Whether you can back out of a mineral rights sale depends on how far the transaction has progressed: before yo… Mineral Entity Buyouts A mineral entity buyout is a sale structured around the ownership vehicle rather than the minerals directly: i… How to Verify a Mineral Rights Buyer Verifying a mineral rights buyer means confirming — through public records anyone can check — that the buyer i… Lease or Sell Mineral Rights Leasing and selling are two different ways to turn mineral rights into money: leasing keeps your ownership and… How to Sell Inherited Mineral Rights Selling inherited mineral rights follows a clear sequence: first establish and document your ownership through… Do I Need a Lawyer to Sell Mineral Rights? You are not legally required to hire your own attorney to sell mineral rights, and a straightforward sale of c… How Long Does It Take to Sell Mineral Rights? Selling mineral rights typically takes a few weeks from accepted offer to recorded deed when ownership is clea… Who Buys Mineral Rights Mineral rights are bought by several kinds of buyers — direct mineral and royalty acquisition companies, priva… Mineral Rights Scams Mineral rights scams are deceptive tactics used to take minerals or money from owners — including mailed "offe… Royalty Aggregation Royalty aggregation is the process by which minerals and royalty companies acquire many individual mineral and… Questions to Ask Before Selling Mineral Rights Before selling mineral rights, an owner should work through a short set of questions — what exactly do I own, …

Mineral Rights Value Calculator A mineral rights value calculator promises to estimate what an interest is worth from a few inputs — but no re…

Transfer on Death Deed for Mineral Rights A transfer on death deed (also called a beneficiary deed) is a recorded instrument that names who will receive… Selling Mineral Rights and Medicaid Selling mineral rights can affect Medicaid eligibility because both the minerals themselves and the royalty in… Gifting Mineral Rights Gifting mineral rights is transferring ownership of minerals to another person or a charity during your lifeti… Divorce and Mineral Rights In a divorce, mineral rights are divided according to whether they are considered marital (or community) prope…