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Oil and Gas Terms and Concepts
The purpose of this page is to define several key terms or concepts relating to oil and gas exploration and production.
Also see Oilfield Glossary by Schlumberger.
Delayed Rental Payment --
Dominant estate --
The parties to a lease are called the lessee and the lessor. The lessee is the person or company to whom the mineral rights are leased. The lessor is the mineral owner who is leasing his or her mineral rights in it to another. To keep this publication in layman's terms, the lessee will be called the company and the lessor will be called the mineral owner.
However, one person or group may own the mineral rights and another person or group the surface rights. Where these differences are pertinent, a distinction is made between the mineral owner and the surface owner.
It is assumed in this web site discussion that the mineral owner owns all of the mineral rights he or she is interested in leasing. However, mineral rights to a particular tract may be owned by multiple parties, resulting in fractional mineral ownership.
Severance by mineral reservation occurs when someone owning both mineral and surface rights legally transfers the surface rights of the property but retains all or a portion of the mineral rights. This deed should also be recorded and be part of any abstract of title to the land involved.
When the mineral rights are severed from the surface rights, whether by reservation or by deed, the mineral rights are considered dominant. Thus, the owner of the mineral rights has the right to use as much of the surface as is reasonably necessary to explore, produce, and transport his or her minerals. However, the mineral rights owner must consider the rights of the surface owner and is required to exercise a degree of care and use that will accommodate the surface owner’s interest when such accommodation is reasonably possible. North Dakota courts have upheld this dominant estate doctrine, as limited by the accommodation doctrine.
Mineral Lease --
Mineral Owner --
Mineral Rights may be defined as the right of ownership of mineral resources which underlie a tract of land. This right of mineral ownership includes the right to explore for, develop, and produce mineral resources. Although oil and gas resources are technically hydrocarbons, they are treated legally as minerals that can belong to a mineral owner.
Pooling -- the concept that ???; a mineral lease could contain language wherein the mineral owner authorizes the company to pool the ???. Alternatively, the state agency (the Industrial Commission in North Dakota) is authorized to pool wells if requested by the company.
Primary Term --
Risk Penalty --
Royalty payment --
Secondary Term --
Severed Mineral Rights are mineral rights held separately from surface rights. This severance occurs when the owner of both mineral and surface rights legally transfers all or a portion of the mineral rights she owns. This mineral deed should be recorded with the county register of deeds and become a part of the abstract of title to the land involved.
Surface Owner --
Surface Rights are the rights to use the surface for agricultural purposes, residential, commercial, industrial, or recreational purposes.
Unitization -- the concept that ???
Commercial or Paying Quantity -- the minimum quantity of production to justify continued operation of a well. Such production transforms a mineral lease from its primary term to its secondary term.
Last Updated July 26, 2010
This material is intended for educational purposes
only. It is not a substitute for competent legal counsel. Seek appropriate
professional advice for answers to your specific questions.
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