Reality check on what I have learned about NPRI

Ownership and Title
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Discussion pertaining to Texas

If party A purchases a non-participating royalty interest in a parcel of land, that will be reflected in a Royalty Deed filed in the appropriate county.

That Royalty Deed proves the right to receive royalties on any well drilled on or into the parcel.

The Royalty Deed will stipulate a fractional interest that will compute to a fixed decimal interest that applies to all revenue generated from the parcel (depending on wording of what is purchased - mineral, oil, gas.)

That base RI can be reduced depending on where in the parcel the well is drilled and the defined pool size.

If the lease is resold by the controlling party(s), and a higher fraction of revenue is reserved (1/4 instead of the original 1/8), the base RI can be increased.

The only ways the Royalty Deed ownership can change is though a sale by party A, or inheritance by other parties following the death of party A.

If an Operator honors proof of heirship by issuing a Division Order on part of the wells in the parcel of land, they must include all wells on the parcel unless they can prove a sale of part of the Royalty Deed.

This describes what I think I understand. Is this correct? Any additions/corrections?

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Just keep in mind that there can be complexities due to the wording of original document and evolving case law. Fixed or Floating Non-Participating Royalty: The World May Never Know - Part I — Childers Hewett Slagle PLLC | Oil & Gas, Business & Real Estate Attorneys

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Ownership change if party A gives some of interest during his lifetime.

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Keep in mind the following regarding Texas Supreme Court decision regarding the Duhig Doctrine.

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TennisDaze

Thank you for the reminder about fixed vs floating. As I understand the topic, the issue can affect the amount of the royalties, but does not affect the right to royalties.

Sclausen

I think of a gift as a zero cost sale. Is it not correct that to be recognized by the courts and appropriate companies, the gift would have to be recorded, just as a sale?

TexasLandman

Thank you for the info. I read the referenced document and am not clear how this would apply to an inherited NPRI. Seems to be more an issue of the purchase and sale on the production side of the equation. Am I missing something?

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