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Oil/Gas/Non-Participating Royalty Interests

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Question
I have a Doctor friend that signed a lease and then was told they couldn't pay him because he only had a Non-Participating Royalty Interests.  They gave a few notes that said he had no Executive Rights and should not receive rentals or bonus under Oil Gas Lease executed by the mineral owners of record.  Will he be able to receive royalties if the section is drilled, and if so, what is the royalty since he doesn't have the right to lease?

thanks,

Michael

Answer
The Doctor owns royalty if the well is drilled but he is not a mineral owner for purposes of the lease.  He is tied to what someone else negotiates for the lease and royalty amount.

It isn't a very good position to be in since he cannot negotiate his own royalty amount but it is what it is.  The oil company is correct that he will not receive the "bonus" for signing the lease but if there is production then he will receive royalty income from the well.

He should ask the oil and gas company for a copy of the base lease that he is under so he will have a copy for his records.  The oil company will very likely come to him and ask him to "ratify" the lease and in some states they will be prevented from "pooling" the base lease with other leases to form a unit.  So, he does have some power to exert.  It would be a good idea to get with a local oil and gas attorney to determine what options he has to protect himself.

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Cliff Williams

Expertise

I will try to answer any question you have. Even if I reject a question, I still will give a shot at what I would do in your position. The only questions I will not take a shot at would be a highly technical engineering or geological question. I am beginning to see quite a few questions from land men and other oil companies and that doesn't matter to me either. I will attempt to help.

Experience

I am an oil and gas attorney that has been in the business for more than 20 years. I have held a series 22 and 63 securities license, been in oil and gas operations, land man, division order analyst all prior to obtaining my law degree. Today, I typically write title opinions verifying ownership of oil and gas minerals, assist landowners in negotiations on oil, gas and mineral leases, easements and conveyances. I also assist oil and gas companies with the sale of working interest ownership as well as common business law issues.

Organizations
State Bar of Texas, Member of the Tarrant County Bar and the Dallas County Bar Associations.

Publications
Multiple oil and gas topical columns on ezine.com.

Education/Credentials
I have a B.S. degree which I rely upon more than my Business Mgmt degree or Law degree...

Awards and Honors
Husband and father of 26 years

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