There is confusion among many concerning these terms.
A NPRI means this - a Non-Participating Royalty Interest. A NPRI is a non-cost (meaning drilling and development) share of production. It is generally expressed as a fraction of production of 8/8ths, but that is not a requirement. Here is an example, Grantor reserves for himself, his heirs and assigns a royalty equal to an undivided 1/16 of 8/8ths of the oil and gas that may be produced from the above described property. A NPRI is a non-possessory interest in production.
A NPMI means this - a Non-Participating Mineral Interest. A NPMI is conceptually rare. It is created by describing the entire mineral estate then reserving all interest except the royalty. Like if you were going to sell a 5 story tenement and described the entire tenement and then reserved all but the top floor. The difference is that the royalty is determined to be a percentage of royalty, such as 1/16 of 1/4 royalty provided on the lease. Other than that, it is a NPRI.
A Non-Executive Mineral Interest is just that. The ENTIRE mineral interest stripped of the right to enter into oil and gas leases. The Non-Executive still gets his share of bonus, royalty, and the rights of ingress and egress.
All three interests will require the joiner of each to pool the intererests. The reason for this, in Texas, is that the pooling transaction creates a cross conveyance of minerals. The holder of the minerals, or the executive, does not have the right to convey the property of the NPRI, the NPMI or the non-executive.
There are an incredible number of nuances to each. Please ask and I will try to explain.
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Dear Professor Cotton,
Are most NPRI's referred to such when conveyed? Conversly are you saying a non-exec mineral right tends to be construed as such by virute of the absence of the NPRI language in a conveyence? Thanks Buddy!
Buddy, if a mineral owner also owns a non-participating interest and executive rights on other owners interests in the same tract, do the non-participating interests and executive right pass in a MD if he does not reserve them?
If a party back in the fourties received a NPRI as a barter for some service unknown, I was led to believe that the NPRI individual had no say in the ingress or egress onto the property or any other activities with regard to the lease and the individual who is the original lease holder. However, say in 1951 he becomes a grantor for a lease held by the family of grantees and sets up the terms and conditions of ingress, egress, drilling, exploration, etc. the npri is no longer a npri but rather a full partner in the lease, or some other legal definition, other than being the lease holder.
How has the State of Texas handled the resolution of such muddled cases as this that are over a half a century old?
Dear Jack,
I really do not quite understand your question, but Texas, as have all the other states, have a Merger of Title Doctrine.
Why would the holder of executive rights refuse to lease? What recourse does the non-exec rights holder have? We have rights to share equally in production, but if there is to be no production, 1/2 of nothing is nothing. Any suggestions?
Diana Laws
Dear Buddy,
In two undivided adjacent sections in Reeves County, TX, I have both participating mineral interest (PMI) and non-participating mineral interest (NPMI). Knowing that the different participating mineral interest holders leased for different royalty rates (20%, 23% or 25%, how is the royalty rate of the NPMI holdings determined? Do I have any say in the royalty rate?
Donny
Buddy,
I think you may be able to shed some light on our particular situation. My family has non participating mineral interest in acreage in Burleson County Texas. The deed clearly states that non executive members of our family will receive 50 percent of lease bonus. We just found out that a lease was signed in December '13 and we were not notified of the proceedings and did not receive the 50 percent of lease bonus. I am assuming we need a lawyer at this point. I made contact with the leasing company yesterday and informed them of the problem. I suppose my first question is who is at fault here-- the leasing company or the executive mineral holders. Are damages normally awarded in case like this?
Dear Tina,
First thing to do is move fast. The Statute of Limitations is tolling.
Jargon gets used a lot here. I am going to assume that you have a non-executive mineral interest. A non-participating mineral interest is pretty rare. I can make that assumption because you mentioned that you would receive 50% of the bonus. A non participating mineral interest has no claim to bonus.
From an industry standpoint, it is common practice for the leasing company to pay the bonus to the non-executive. I have been informed by legal that it is the responsibility of the executive to properly manage the interests of the non-executives and are therefore act and are held to a quasi-fiduciary standing.
There may be an easy answer why you were not paid == title was not completed, etc. I would contact the leasing company by certified mail with a copy to the executives demanding payment. Also, exhibit caution if they will not pay you without you ratifying the lease. That is not a condition of payment.
Best
Buddy Cotten
Hi Buddy and group,
Just joined MRF. Looks like I have been missing out.
I found an interesting reservation last week from 1939: "AN UNDIVIDED 1/4 INTEREST IN AND TO ALL ROYALTIES ON ALL OIL AND GAS AND MINERALS IN SAID LANDS, AND AN UNDIVIDED 1/8 INTEREST IN ALL BONUSES, DEFERRED RENTALS AND OTHER CONSIDERATIONS TO BECOME DUE UNDER ANY LEASE NOW OUTSTANDING ON SAID LANDS . . . OR HEREAFTER TO BE EXECUTED . . . THAT IT SHALL NEVER BE NECESSARY FOR THE GRANTOR . . . TO JOIN IN THE EXECUTION OF ANY LEASE. . . This, of course, in a non-executive interest. The second part of the reservation, "bonuses, deferred rentals," etc. is of greater interest. Is this really a stripped down mineral interest? A non-executive mineral interest or NPMI? Thanks in advance for sharing your thoughts!
Dear Joshua,
For the benefit of others, you have listed a transaction where all the elements of the mineral estate were addressed.
Tbere is a deed covering lands in Orange, Jasper and Newton Counties, Texas where much the same.happened, except in this case, in addition to everything else, the Grantor reserved the executive right for a 25 year term, then the entire 100% executive right reverted to the Grantee.
This is perhaps a transaction that defies categorization into a neat little box. First you have a Non executive interest. I really do not think that this transaction falls into the category of a NPMI, since all the elements of the mineral estate were not stripped in their entirety, but the net effect from the royalty standpoint is that it is a NPMI. But, they do participate in bonus and delay rentals, so by definition it cannot be a NPMI.
I will let commentators that fly in the rarefied air of the esoteric offer their opinions. Perhaps we need Ernest O Smith for this one.
Best,
Buddy Cotten
Hi Buddy my family and I have a question regarding our NPRI mineral interests. Hope I am not in the middle of currents posts? I hope to hear back.
Thank you,
Joel
Buddy,
If I own xx participating nma under lease and also xx non-participating nma in the same section, once royalties are generated from a well, will I get the same 25% royalty for the NPRI nma as the participating nmp royalties? On the deed the only difference designated between the two is PRI and NPRI.
Donny
@Donny Hamilton
The 25% royalty that you refer to is what I am suspecting is provided for on a lease where you own an undivided mineral interest and that the lease provides for a royalty in the event of production of 25%.
The non-participating nma is not a term that is in common use. If you mean "non-executive" then you will be paid your proportionate share provided as royalty on the lease on which you own a non-executive mineral interest.
If the term "non-participating" then I am thinking that you are paid on a share of royalty. The document creating each will need to be reviewed.
Go to this blog post and it might give you insight in how royalties are computed:
http://www.mineralrightsforum.com/profiles/blogs/division-order-worksheet
Best,
Buddy Cotten
Hi Buddy,
How does the market value of these 3 types of interest compare?
Dear Ms. Lauderdale,
Thank you for your question. It is a good question. The Non Executive MIneral Interest has a higher market value inasmuch as that interest is entitled to a share of Bonus and Rents when the property is leased.
Best,
Buddy Cotten