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# Oil/Gas/Division Order Interest

Question
I have a 1/48th interest in several tracts in Weld County Colorado.  There is a producing well, and I'm trying to verify the NRI on the division order.  My lease has 1/6th Royalty.  What is confusing to me is a non-participating royalty interest of 1/8 of the usual and ordinary 1/8 royalty interest which is apparently being deducted.  I just can't come up with the calculation.  They say my division order mineral interest is 1/96th.  Your input will be appreciated.

Thank you.

Non-participating royalty interests can be owned two ways, depending on the language in the granting clause or reservation clause in the deed or other conveyance: (1) As a specific fraction of the royalty rate stated in any current or future lease, or (2) As a specific fraction of all production revenues involving the land regardless of the lease royalty rate.

You say in your question that the NPRI is "1/8 of the usual and ordinary 1/8 royalty interest".  This falls into type (1) I stated above, but can be the most difficult and tricky to calculate.  This is because there are numerous court cases that rule that if the conveyance document actually uses the words "of the usual and ordinary 1/8" it might not mean that.  If the conveyance document was created more than 40 years ago when landowners believed the 1/8th was all the royalty they could ever get, court cases have ruled that the intent of the conveyance was to give the NPRI owner the stated fraction of whatever the royalty rate is in the lease, even if it is more than 1/8th.

So without knowing the acreage figures, your ownership in your tract under (1) above would be 0.00303819 =  (7/8 x 1/6) x 1/48 or 0.00314670 = [(1/6) - (1/8 x 1/8)] x 1/48 if record title shows that you own 1/46 and the title examiner made a mistake.  If record title shows 1/96 and you are unaware of an additional conveyance that happened before you got ownership, the numbers would be 0.00151910 and 0.00157335 respectively, by substituting 1/96 for the 1/48.  Then those numbers must be further reduced by the number of gross acres you own that are inside the unit divided by the total size of the unit.

Once you reduce each of these four decimals by the acreage fraction, does any of the results match what is in your division order?

I gave you all of this information because you could have two problems going on at once: (1) the title examiner (attorney) could have made a mistake as to how much mineral rights you own, and (2) the granting clause or reservation clause in the conveyance creating the NPRI amount may have been interpreted incorrectly. IMPORTANT TO KNOW: A non-participating royalty interest is not a type of mineral rights interest.  You own the full 1/46 or 1/96 mineral rights, but you do not own the right to receive 100% of the royalties payable to your mineral rights--the NPRI owner(s) burdening you own part of the right to receive royalties payable to your mineral rights.

Questioner's Rating
 Rating(1-10) Knowledgeability = 10 Clarity of Response = 10 Politeness = 10 Comment Thank you for your response! Now I need to think about all this and how it applies to my situation.

Oil/Gas

Volunteer

#### Marsha Breazeale, M.Ed., CDOA, CPLTA

##### Expertise

All questions regarding division orders; ownership decimal calculations; title ownership and payer record changes (testate/intestate inheritance; deed; assignment; court order); oil and gas lease analysis for record-keeping and purposes of payment by operator or payer; pooling, horizontal wells, horizontal well allocation units; unclaimed property reporting; royalty owner relations questions. All questions concerning administration of surface land contracts and payment questions, such as for Surface Right-of-Way, Sub-Surface Right-of-Way, Easement, Surface Use Agreement. All questions regarding industry-standard and company-specific policies that affect land owners.

##### Experience

Sr. Staff Division Order Analyst. Certified Division Order Analyst (CDOA, National Association of Division Order Analysts) and Certified Lease Analyst (CPLTA, National Association of Professional Lease and Title Analysts) with 35 years of experience as a combination division order analyst and lease analyst in exploration and production in the oil and gas industry.

Organizations
National Assoc. of Division Order Analysts (NADOA), National Association of Division Order Analysts (NALTA), American Association of Professional Landmen (AAPL), American Society of Trainers and Developers (ASTD)

Publications
"How an Oil & Gas Exploration & Production Company Operates" and "Principles of Oil & Gas Lease Analysis: Standard Clauses", Oil Patch Press; Articles in NADOA Magazine; LandFocus EDU Professional Training Manuals

Education/Credentials
B.A.in Management from Our Lady of the Lake University in San Antonio; M.Ed. in Instructional Design from WGU Texas.

Past/Present Clients
Past 15 years: GeoSouthern Energy Corporation; Contango Oil Co./Crimson Exploration & Operating Inc.; Apache Corporation; BP America; Marathon Oil; Newfield Exploration