Understanding Ownership Interests in Oil and Gas

Mississippi is one of the leading states that produce oil and gas. If you work in this industry, it’s not uncommon to require the assistance of an oil and gas attorney in Mississippi. This field is complicated and involves legal issues such as reserving minerals, excepting minerals or selling minerals. Oil and gas companies also require attorneys to check the titles, organize drill site opinions and determine who to pay if there is a profit.

With new advancements in technology, the United States is quickly becoming one of the world’s top oil producers. A new technique called fracking allows oil and gas companies to drill down old wells or new locations that weren’t traditionally associated with oil and gas production. With old wells getting new life, what does this mean for the people who drill and the people who own the minerals and the land? Let’s take a look.

Types of Ownership Interests

Ownership interests in oil and gas laws are complex. The three most important types of ownership interests include mineral interest, working interest, and royalty interest.

  • Mineral interests- Oil and gas are severable from the surface of the land, just as minerals are. A mineral-estate owner has rights to the minerals below the land, or they can lease the land and collect royalties. A surface-estate owner only has rights to the surface of the land.
  • Working interests- Working-interest owners are in charge of all production that takes place at the well. These investors get a cut of the profit, but they are responsible for paying a large portion of drilling and production costs.
  • Royalty interests- Royalty interests come in a few different forms.
    • Lease royalty interest- This is interest given to the mineral owner by oil producers in return for leasing the land.
    • Nonparticipating royalty interest- This interest comes from the gross production of oil, gas and other minerals. This owner “has no authority to participate in the leasing rights of the estate.”
    • Overriding royalty interest- An overriding royalty interest is the right to collect revenue from oil and gas production. It is carved out of the operator’s working interest and is only paid in the event of production.

The oil and gas industry is very complex, which is why you need an experienced oil and gas attorney in Mississippi to help with your ownership rights. For this level of expertise, schedule a consultation with Susan G. Pinkston today.

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