In Texas, when you own mineral interest, you lease that interest in exchange for receiving royalty payments based on how much of the minerals are extracted. Mineral interest or royalty interest are often involved in inheritance disputes like contesting a will. This article gives a brief description of mineral or royalty interest in Texas.
Every fact situation is different and you should not take, or refrain from taking, any action based on what you read. You should talk to your attorney about your situation to understand what your rights are.
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In Texas, an instrument conveying land transfers both the surface estate and all minerals and mineral rights, unless the instrument contains a reservation or expresses a contrary intention. In many cases, a person will sell land but will reserve the minerals. That creates two estates, the surface and the mineral estate. I have written about that…
The mineral estate is comprised of five severable rights: “1) the right to develop, 2) the right to lease, 3) the right to receive bonus payments, 4) the right to receive delay rentals, and 5) the right to receive royalty payments.”
The holder of the leasing privilege is the executive-interest holder. The executive enjoys the exclusive right to make and amend mineral leases and, correspondingly, to negotiate for the payment of bonuses, delay rentals, and royalties, subject to a duty of utmost good faith and fair dealing to non-executive interest holders. In Texas, a typical oil and gas lease actually conveys the mineral estate with the possibility that the mineral estate will revert to the owner if the oil company stops producing.
A royalty interest is a nonpossessory interest in minerals. A party possessing a royalty interest that does not include the right to lease the mineral estate, receive delay rentals, or bonus payments is referred to as a non-participating royalty-interest holder. I have written about non-participating interest here.
This article is based on a 2015 decision of the Supreme Court of Texas in a case dealing with the very complicated issue of “fractional royalty interest” versus “fraction of royalty interest.” Hysaw v. Dawkins.
