Ownership of the mineral estate includes five essential rights: 1) to develop 2) to lease 3) to receive bonus payments 4) to receive delay rentals and 5) to receive royalty payments.
If the mineral owner decides to develop the estate himself, the first right allows him to explore, drill, produce, transport, store and market the minerals. In most instances, the mineral owner (lessor) transfers the right to develop the minerals to an oil and natural gas operator in an oil and natural gas lease.
The remaining four rights involve a lease agreement between a lessor and a lessee. The right to enter into this agreement is the right to lease and is also termed the “executive right.” The other three rights are provided for in the lease. Bonus payments provide compensation to the lessor for transferring the right to lease to an oil and natural gas operator. Royalty payments provide the lessor a specified fraction of production or the value thereof, without deducting the cost of drilling and operating the property. Lastly, delay rental payments are made to the lessor in order to defer drilling.
Sources:
- Conservation Easements Texas Landowners, Jeff Francell, Guadalupe-Blanco River Trust (2009)
- Texas Law of Oil and Gas, Ernest E. Smith and Jacqueline Lang Weaver, Section 2.1, Volume 1, Second Edition 2015
- Texas Natural Resources Code, Section 111.002
- Texas Business Organizations Code, Section 2.105
- Texas Property Code, Section 21.0112(a)
- Texas Government Code, Section 402.031