Mineral Rights Glossary
Key terms and definitions every mineral owner should know.


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A
1031 Exchange
A tax-deferral strategy that allows mineral owners to defer capital gains taxes when selling mineral rights by reinvesting the proceeds into similar "like-kind" property within specified timeframes.
Abandoned Well
A well that is no longer in use or being maintained by the operator. State regulations typically require abandoned wells to be properly plugged to protect groundwater and the environment.
Acreage
The total land area, measured in acres, that is subject to a mineral lease or ownership interest.
Ad Valorem Tax
A property tax levied by counties based on the assessed value of mineral interests. These taxes are typically calculated as a percentage of the estimated market value of annual production.
AFE (Authorization for Expenditure)
A document that provides a detailed estimate of the costs to drill and complete a well. Working interest owners typically receive AFEs before drilling begins.
Assignment
The legal transfer of rights, title, or interest in a mineral lease or mineral ownership from one party to another.
B
Barrel (BBL)
The standard unit of measurement for crude oil, equal to 42 U.S. gallons. Production and royalty statements typically report oil volumes in barrels.
Basin
A large geological depression containing thick accumulations of sedimentary rock that may contain oil and gas deposits. Examples include the Permian Basin, Williston Basin, and Anadarko Basin.
BCF
Billion cubic feet - a unit of measurement for large volumes of natural gas, commonly used when discussing reserves or field production.
BOE (Barrel of Oil Equivalent)
A unit of measurement that converts natural gas volumes to their energy equivalent in barrels of oil. Typically calculated as: BOE = Barrels of Oil + (MCF of Gas ÷ 6).
Bonus Payment
An upfront, one-time payment made by an oil and gas company to a mineral owner in exchange for signing a mineral lease. This is separate from royalty payments.
Borehole
The hole drilled into the earth to reach oil or gas deposits. Also called a wellbore.
C
Carried Interest
A working interest in which the owner is not required to pay drilling or completion costs, as those costs are "carried" by another party.
Casing
Steel pipe installed in a drilled well to prevent the wellbore from collapsing and to protect groundwater from contamination.
Check Stub (Revenue Statement)
The monthly or periodic statement that accompanies royalty payments, detailing production volumes, prices, deductions, taxes, and net payment calculations for each well.
Clear Title
Mineral ownership that is free from defects, liens, encumbrances, or questions about the legitimacy of ownership. Clear title is essential for leasing and selling mineral rights.
Completion
The process of making a well ready for production after drilling, including perforating, fracturing, and installing production equipment.
Condensate
A light liquid hydrocarbon that separates from natural gas when pressure and temperature are reduced. Condensate is typically more valuable than crude oil and is reported separately on royalty statements.
Conveyance
A legal document that transfers ownership of mineral rights from one party to another, such as a deed.
Cost Depletion
A tax deduction that allows mineral owners to recover the cost of their investment in mineral properties as the minerals are extracted.
Crude Oil
Unrefined petroleum liquid extracted from underground reservoirs. Crude oil varies in quality (measured by API gravity) and sulfur content, which affects its market price.
Curative
The process of correcting title defects or errors in the chain of ownership for mineral rights. Common curative documents include affidavits, ratifications, and corrective deeds.
D
Decimal Interest
A mineral owner's share of production expressed as a decimal. For example, a 1/8 royalty equals 0.125 decimal interest.
Decline Curve
A graphical representation of how a well's production decreases over time. Decline curves are used to forecast future production and estimate the remaining value of mineral interests.
Defects in Title
Problems or errors in the chain of ownership that create uncertainty about who legally owns the mineral rights. Common defects include missing signatures, incorrect legal descriptions, or gaps in the title chain.
Delay Rental
Periodic payments made by a lessee to a mineral owner to maintain a lease in force during the primary term when no drilling operations have commenced.
Division Order
A document that specifies each owner's decimal share of production from a well. Mineral owners sign division orders to authorize the operator to distribute royalty payments.
Dry Hole
A well that does not produce oil or gas in commercial quantities. Also called a "duster."
DUC (Drilled but Uncompleted)
A well that has been drilled but has not yet been hydraulically fractured or otherwise completed for production. Operators may delay completion due to commodity prices, pipeline capacity, or other factors.
E
Easement
A legal right to use another person's land for a specific purpose, such as pipeline access or road access to a well site.
Enhanced Oil Recovery (EOR)
Techniques used to extract additional oil from a reservoir beyond what primary and secondary recovery methods can achieve. Methods include injecting gas, steam, or chemicals to improve oil flow.
Escheated Property
Mineral interests or royalty payments that revert to state ownership when the rightful owner cannot be located after a specified period. States have unclaimed property laws governing escheatment.
Executive Rights
The right to negotiate and sign oil and gas leases on behalf of the mineral estate. This right can be severed from the mineral ownership itself.
F
Farm-In / Farm-Out
An agreement where one party (farm-in) acquires an interest in a lease from another party (farm-out), typically by agreeing to drill a well or pay certain costs.
First Purchaser
The entity that initially purchases oil or gas production at the wellhead or lease. The first purchaser is typically responsible for reporting production to state agencies.
First Right of Refusal
A lease provision that gives the current lessee the opportunity to match any offer from a third party before the mineral owner can lease to someone else.
Flaring
The controlled burning of natural gas at a well site, typically when pipeline infrastructure is not available to transport the gas to market. Regulations increasingly limit flaring due to environmental concerns.
Flush Production
The high initial production rate from a newly completed well before production begins to decline. Flush production typically represents the peak output of a well.
Force Pooling
A legal process by which a state regulatory agency combines mineral interests into a drilling unit when voluntary pooling agreements cannot be reached. Also called compulsory pooling.
Formation
A distinct layer of rock with consistent characteristics that can be mapped across an area. Oil and gas are typically found in specific formations, such as the Wolfcamp, Eagle Ford, or Bakken.
Frac / Fracking (Hydraulic Fracturing)
A well stimulation technique that involves pumping fluid, sand, and chemicals into a well under high pressure to create fractures in the rock formation, allowing oil and gas to flow more freely.
G
Gathering System
A network of pipelines that collects oil or gas from multiple wells and transports it to a central processing facility or larger transmission pipeline.
Grantee
The party receiving ownership rights in a deed or conveyance. In mineral transactions, the grantee is the person or entity acquiring mineral rights.
Grantor
The party transferring ownership rights in a deed or conveyance. In mineral transactions, the grantor is the person or entity selling or gifting mineral rights.
Gross Acres
The total number of acres in a lease or tract, regardless of the owner's fractional interest in those acres.
H
HBP (Held by Production)
A lease status indicating that the lease has extended beyond its primary term and is being maintained by ongoing production from a well on the leased premises.
Horizontal Drilling
A drilling technique where the wellbore is turned from vertical to horizontal to follow a productive formation over a greater distance, increasing the well's exposure to oil or gas deposits.
I
Infill Drilling
Drilling additional wells between existing wells in a proven field to increase production and recover more oil or gas from the reservoir.
In-Pay
Status of a mineral interest that is currently receiving royalty payments from producing wells.
IP (Initial Production)
The production rate of a well during its first period of operation, typically measured over 24 hours (IP24), 30 days (IP30), or 90 days (IP90). IP rates are key indicators of well performance and are used to estimate future production.
J
JIB (Joint Interest Billing)
A statement sent to working interest owners detailing their share of operating expenses for a well or lease.
Joint Operating Agreement (JOA)
A contract between working interest owners that establishes the rights and obligations of each party in the operation of oil and gas properties.
L
Landman
A professional who researches mineral ownership, negotiates leases, and manages land-related aspects of oil and gas operations.
Lease
A legal contract between a mineral owner (lessor) and an oil company (lessee) granting the right to explore for and produce oil and gas from specified lands.
Leasehold Interest
The interest held by a lessee (typically an oil company) under an oil and gas lease, giving them the right to drill and produce.
Legal Description
The precise description of a property's location using a standardized system, typically the Public Land Survey System (PLSS) with section, township, and range, or metes and bounds descriptions. Essential for identifying mineral ownership.
Lessee
The party (typically an oil and gas company) that receives the right to explore for and produce minerals under an oil and gas lease.
Lessor
The mineral owner who grants the right to explore for and produce minerals to a lessee under an oil and gas lease.
M
Mcf
Thousand cubic feet - a common unit of measurement for natural gas volume.
Mineral Deed
A legal document that transfers ownership of mineral rights from one party to another.
Mineral Estate
The ownership interest in the minerals beneath the surface of a property. This can be owned separately from the surface estate.
Mineral Rights
The legal rights to explore, extract, and sell minerals found beneath the surface of a property. These rights can be sold, leased, or transferred separately from surface rights.
MMBtu
One million British Thermal Units - a standard unit of measurement for natural gas pricing and energy content.
N
Net Mineral Acres (NMA)
The actual mineral acreage owned by an individual, calculated by multiplying gross acres by the owner's fractional mineral interest. For example, owning 50% of the minerals under 100 acres equals 50 NMA.
Net Revenue Interest (NRI)
The share of production revenue that a mineral or royalty owner is entitled to receive after all burdens (such as royalties and overriding royalties) are deducted.
Net Royalty Acres (NRA)
A measure of royalty ownership that accounts for both the acreage and the royalty rate. Calculated by multiplying net mineral acres by the royalty rate (e.g., 50 NMA x 1/8 royalty = 6.25 NRA).
NGL (Natural Gas Liquids)
Hydrocarbons found in natural gas that are liquids at surface conditions, including ethane, propane, butane, and natural gasoline. NGLs are typically separated and sold separately, providing additional revenue to mineral owners.
Non-Participating Royalty Interest (NPRI)
A royalty interest that entitles the owner to a share of production but does not include the right to lease the minerals, receive bonus payments, or delay rentals.
Non-Producing Mineral Rights
Mineral interests that are not currently generating royalty income because no wells are producing on the property. Also called "non-pay" minerals.
O
Operator
The company or individual responsible for the day-to-day operations of drilling and producing oil and gas wells. The operator may or may not own a working interest in the well.
Overriding Royalty Interest (ORRI)
A royalty interest carved out of the working interest (not the mineral interest) that entitles the owner to a share of production free of operating costs. ORRIs expire when the underlying lease expires.
P
Paid-Up Lease
An oil and gas lease where the bonus payment covers the entire primary term, eliminating the need for annual delay rental payments. Most modern leases are paid-up leases.
Payout
The point at which revenues from a well equal the costs of drilling and completing the well.
Percentage Depletion
A tax deduction that allows mineral owners to deduct a percentage of gross income from mineral production, regardless of the actual cost basis in the property.
Perforating
The process of creating holes in the well casing to allow oil or gas to flow into the wellbore from the surrounding formation.
Permit
Authorization from state regulatory agencies allowing an operator to drill a well. Permits must be obtained before drilling begins and typically require submission of well location, operator information, and planned depth.
Play
A geographic area where oil and gas exploration and production activities are focused on a particular geological formation. Examples include the Permian Basin, Eagle Ford, and Bakken plays.
Pooling
The combining of multiple mineral tracts or leases into a single drilling unit for the purpose of drilling a well. Pooling allows operators to drill on larger units and ensures all mineral owners within the unit share in production.
Post-Production Costs
Expenses incurred after oil or gas is extracted, including gathering, transportation, processing, and marketing costs. Whether these costs can be deducted from royalty payments depends on lease language.
Primary Term
The initial fixed period of an oil and gas lease during which the lessee must begin drilling operations or pay delay rentals to maintain the lease.
Producing Mineral Rights
Mineral interests that are currently generating royalty income from producing wells. Also called "in-pay" minerals.
Proration Unit
The acreage assigned to a well by state regulatory agencies for production allowable purposes.
Pugh Clause
A lease provision that releases non-producing acreage from the lease at the end of the primary term, even if other portions of the lease are held by production.
R
Range
In the Public Land Survey System (PLSS), a vertical column of townships identified by its position east or west of a principal meridian. Used with township and section to precisely locate property.
Ratification
A document signed by a mineral owner to confirm or validate a previously executed lease, often used when there are title issues or when a new owner acquires minerals already under lease.
Recompletion
The process of re-entering an existing well to produce from a different formation or to stimulate production from the current formation.
Reservoir
A subsurface rock formation that contains oil, gas, or water. The rock must have sufficient porosity to store fluids and permeability to allow fluids to flow through it.
Royalty Interest
A share of production (or the value of production) from an oil and gas lease that is paid to the mineral owner free of the costs of drilling, completing, and operating the well.
Run Ticket
A document that records the quantity and quality of oil transferred from a lease storage tank to a purchaser's truck or pipeline.
S
Secondary Term
The period after the primary term during which a lease is maintained by production or operations. The secondary term continues as long as the lease remains held by production.
Section
A unit of land in the Public Land Survey System (PLSS) measuring one square mile (640 acres). Sections are identified by number (1-36) within a township. Many drilling units are based on section boundaries.
Severance
The legal separation of mineral rights from surface rights, creating two distinct ownership interests in the same property.
Severance Tax
A state tax imposed on the extraction of natural resources, including oil and gas. The tax is typically calculated as a percentage of production value or volume.
Shut-In Royalty
A payment made by an operator to a mineral owner when a well capable of producing is temporarily shut in (not producing). Shut-in royalty payments can maintain a lease during periods when the well is not actively producing.
Spacing Unit
The area of land designated by state regulations for the drilling of one well. Spacing requirements help prevent waste and protect correlative rights.
Spud
To begin the actual drilling of a well. The "spud date" is the date drilling commenced.
Stacked Pay
Multiple oil or gas-bearing formations located vertically above or below each other in the same area. Properties with stacked pay zones may support multiple wells targeting different formations.
Surface Rights
The ownership rights to the surface of a property, which can be owned separately from the mineral rights beneath.
Suspense (Suspended Funds)
Royalty payments held by an operator when there are questions about ownership, title defects, or missing documentation. Funds remain in suspense until the issues are resolved and proper ownership is established.
T
Title Opinion
A legal document prepared by an attorney that examines the chain of ownership for mineral rights and identifies any title defects or requirements.
Top Lease
A lease negotiated to take effect if and when an existing lease on the same property expires or terminates.
Township
A unit of land in the Public Land Survey System (PLSS) measuring six miles by six miles (36 square miles). Each township is divided into 36 sections of one square mile each. Also refers to the horizontal row designation in the PLSS grid.
Tract
A specific parcel of land that can be identified by its legal description. May refer to the surface, minerals, or both depending on context.
U
Undivided Interest
A fractional ownership share in minerals that is not physically divided or located in a specific portion of a tract. All owners of undivided interests share proportionally in any production from the entire tract.
Unitization
The consolidation of mineral interests covering a reservoir or field into a single unit for more efficient development and operation. Different from pooling, which typically applies to individual wells.
W
Wellbore
The hole drilled into the earth to reach oil and gas deposits. Also called a borehole.
Wellhead
The equipment installed at the surface of a well to control pressure and provide access to the wellbore. The wellhead is the point where production is measured and where ownership typically transfers from the producer to the purchaser.
Wildcat Well
An exploratory well drilled in an area where no oil or gas production currently exists.
Working Interest (WI)
An ownership interest in an oil and gas lease that bears the costs of drilling, completing, and operating a well. Working interest owners are entitled to a share of production after royalties are paid.
Workover
Operations performed on an existing well to restore, maintain, or improve production. This may include repairs, cleanouts, stimulation, or recompletions.
WTI (West Texas Intermediate)
A grade of crude oil used as a benchmark for pricing oil in North America. WTI prices are frequently referenced in royalty calculations and are quoted on the New York Mercantile Exchange.

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