OK. Pooling Order #695219 Dewey 27-18N-14W
Options: $2500 1/8; $2000 3/16; $1500 1/5. I normally take the low bonus and higher royalty.
I’ve never seen these wordings before. Would someone please explain the following for the 1/5th royalty option:
- Para. 7.4 “$1500. per acre plus an overriding royalty OR excess royalty of 7.5% x 8/8” Exactly what does that last part mean?
- Para. 7.4 added at the end–“in the event any owner’s interest is subject to a royalty, overriding royalty, or other burden on production in excess of the normal 1/8 royalty…then such…shall be charged against the 7.5% x 8/8…and the same shall be reduced by the amount of any such excess.”
Thanks in advance
Under the spacing statute, every owner is entitled to a 1/8 royalty, which is 12.5%. So the excess royalty is 7.5% in addition to the 12.5%, or 20%, which is 1/5.
The second paragraph is primarily directed at leasehold owners. Suppose a lessee takes a lease at 3/16, which is 18.75%. “in the event any owner’s interest is subject to a royalty, overriding royalty, or other burden on production in excess of the normal 1/8 royalty…then such…shall be charged against the 7.5% x 8/8…and the same shall be reduced by the amount of any such excess” means that lessee can’t receive 7.5% in addition to his/her 18.75 %. It is deducted from that part in excess of 12.5% (or 1/8). I.e., you/ anybody can’t receive more than a 20% royalty or can’t add their overriding royalty interest on top of a lessor’s royalty to come to more than 20%.
3 Likes
Thanks, Tim, for breaking this down for me. I can now reply with my royalty option.