Texas oil and gas lawyers occasionally find themselves representing non-executive mineral owners. A non-executive mineral or royalty owner is someone who owns oil or gas royalty rights to a particular area of land, but who does not have the right to negotiate or sign a lease for the minerals and who usually does not have the right to receive bonus payments. The executive rights owner is the person who is has the exclusive right to execute oil and gas leases on a particular area of land and to receive bonus. Commonly, these relationships are created by a reservation in a deed, such as when someone sells their surface and mineral rights, including the right to negotiate an oil and gas lease, but reserves a non-participating royalty interest.
Recently, the Texas Supreme Court considered what duties are owed by the owner of an executive interest in minerals to the owners of the non-executive interests in the case of KCM Financial LLC v. Bradshaw. In this case, Bradshaw was the non-executive royalty owner and KCM Financial was the executive.
In this case, two deeds were executed in 1960 that reserved a non-participating royalty interest for Bradshaw of an undivided one-half of any future royalty, but not less than one-sixteenth share of gross production. In 2005, the executive KCM bought the land, and in 2006 KCM leased the land to lessee Range Resources for a one-eighth royalty interest and a 13 million dollar bonus. Nice payday for KCM!
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