Leasing Terminology
Lease
Lessee |
A contract stating that the lessee will pay the lessor for the use of an asset or multiple assets
The company or individual who has the right to use the assets of the owner in exchange for payment
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Lessor
Leaseholder |
The original owner of the asset being used by the lessee
The agreement that transfers the mineral rights of the lessor to the lessee |
Royalty interest
Rule of Capture Non-Participation Royalty |
A fraction of the proceeding made by production that is paid to the lessor, often on a monthly basis
If a resource is below a community but a well is build on a specific property then whatever comes out of that well belongs to the person capturing the resource If a resource is below a community but a well is build on a specific property then whatever comes out of that well belongs to the person capturing the resource |
Fee Interest
Mineral Fee/Estate Interest Pooling Voluntary Pooling |
All of the surface mineral rights
Recognized by law as the most complete ownership of minerals, the right to use the land for the exploration, development, and production. The owner of these rights may be different than the holder of the surface rights In terms of fracking, it is the joining together of tracts of land, typically small or a portion, in order to have enough acreage to obtain a well drilling permit and to share production and benefits When the lessors agree to pool their tracts of land |
Mandatory/Forced Pooling
Utilization |
When a lessor is forced to pool due to having an insufficient amount of acreage and the terms of their lease allow the lessee to combine their property with others
The consolidation of mineral interests covering all or part of a common source of supply, typically there are multiple wells as opposed to pooling, which has many tracts of land producing for a single well |
Executive Right
Non-Executive Mineral Interest Primary Term |
The right to grant a lease
An individual holding this interest may not develop or execute leases and are, instead, bound by the interests of individual or group providing the land The period of time a lease must be honored, even if there is no production or payments made during this time unless specified otherwise in the initial contract |