Mineral Rights Glossary: 40 Terms Explained in Plain English

Mineral rights come with a lot of jargon. When you are new to it, leases, division orders, and decimal interests can feel like a foreign language. This glossary explains 40 of the most common terms in plain English, grouped so you can find what you need. Keep it handy as you read leases, check stubs, and offer letters.

Ownership and rights

• Mineral rights: ownership of the oil, gas, and minerals beneath a tract of land, which can be owned separately from the surface.
• Surface rights: ownership of the land surface, separate from the minerals below it.
• Severed minerals: minerals that have been split off from the surface ownership, so different people own each.
• Fee minerals: privately owned minerals, as opposed to minerals owned by the government.
• Mineral interest: your ownership stake in the minerals under a specific tract.
• Royalty interest: the right to a share of production revenue without paying the costs of drilling and operating.
• Working interest: an ownership stake that does pay a share of drilling and operating costs in exchange for a larger share of revenue.
• Net revenue interest: your share of revenue after royalties and other burdens are taken out.
• Overriding royalty interest: a royalty carved out of the working interest, ending when the lease ends.
• Non-participating royalty interest: a royalty share that does not include the right to lease or to receive lease bonus.

Measuring what you own

• Net mineral acres: your true ownership in mineral acres, often a fraction of the surface acreage.
• Gross acres: the total acreage of a tract, before figuring your fractional share.
• Decimal interest: the exact fraction of a well's revenue that belongs to you, often a long decimal like 0.00123.
• Fractional interest: your ownership expressed as a fraction, such as one-sixteenth.
• Undivided interest: ownership of a share of the whole tract rather than a specific marked-off piece.
• Tract: a defined parcel of land described in the records.
• Legal description: the formal description of where your minerals are, such as a section, township, and range.
• Section, township, and range: the survey grid used to describe land location in many states.

Leasing terms

• Oil and gas lease: the contract that lets an operator explore for and produce minerals on your tract.
• Lease bonus: an upfront payment to you for signing a lease, often quoted per net mineral acre.
• Royalty rate: the share of production you keep under the lease, such as one-eighth or one-quarter.
• Primary term: the initial period of a lease during which the operator must drill or the lease expires.
• Held by production: a lease that continues beyond its primary term because a well is producing.
• Delay rental: a payment that keeps a lease alive during the primary term without drilling.
• Pooling: combining several tracts into one drilling unit so a well can be drilled efficiently.
• Unitization: a larger-scale combination of tracts to develop a field as a whole.
• Force pooling: a state process that includes your minerals in a unit even without a signed lease, common in states like Oklahoma.

Production and payments

• Division order: a document confirming your decimal interest and where to send your royalty payments.
• Royalty check: the periodic payment you receive for your share of production.
• Suspense: royalties an operator holds because ownership or title is not yet confirmed.
• Post-production costs: expenses like processing and transportation that some leases let operators deduct.
• Operator: the company that drills and runs the wells on your tract.
• Producing well: a well actively pulling oil or gas and generating royalties.
• Non-producing minerals: minerals with no active well paying you right now.
• Decline curve: the expected decrease in a well's production over time.

Transactions and value

• Fair market value: what a willing buyer and seller would agree on, neither under pressure.
• Cost basis: your value in the minerals for tax purposes, used to calculate gain on a sale.
• Stepped-up basis: a reset of basis to the date-of-death value for inherited minerals, which can lower taxable gain.
• Capital gain: the taxable profit when you sell minerals for more than your basis.
• Affidavit of heirship: a sworn statement of who the legal heirs are, used in some states to help clear title.

Keep this glossary nearby as you work through your documents. When you are comfortable with the terms, our guides on how minerals are valued and whether to keep or sell are good next reads. Owners in active areas from Texas to North Dakota start exactly where you are now.

And whenever you are ready to find out what your interest is worth, you can request a free valuation with no obligation and no pressure.