Glossary
The jargon, translated.
The mineral business runs on terms of art, and terms of art favor whoever already knows them. Here’s every word owners actually meet — in plain English, with no test afterward.
- Ad valorem tax
- A local property tax some states levy on producing minerals, usually deducted from royalty checks. Look for it as a line item on your stub.
- Bonus
- The up-front, per-acre payment an oil company makes to sign a lease. Paid once at signing — separate from royalties, which only flow if wells produce.
- Decimal interest
- Your share of a well’s revenue, expressed as a decimal on the division order. For most royalty owners: net mineral acres ÷ spacing-unit acres × royalty rate.
- Decline curve
- The predictable path of a well’s falling production — steep in the first years, flattening into a long tail. The reason royalty checks shrink even when nothing is wrong.
- Delay rental
- A small annual payment that keeps an old-style lease alive during years with no drilling. Largely replaced today by paid-up leases that fold the rentals into the bonus.
- Division order
- The operator’s one-page statement of your decimal interest in a well, sent for signature before royalties are paid. Confirms payment details; in most states it does not amend your lease.
- Dormant Mineral Act
- A statute (notably in Ohio, with cousins elsewhere) letting surface owners claim severed minerals left unused for roughly twenty years — unless the mineral owner records a preservation document. Cheap to prevent, painful to litigate.
- Executive rights
- The right within the mineral bundle to negotiate and sign leases. An owner can hold royalty without executive rights — that’s an NPRI.
- Fee minerals
- Privately owned minerals — your family’s, not the government’s. What we buy.
- Forced pooling
- A state order combining all tracts in a drilling unit — including unleased or holdout owners — so a well can proceed, with statutory terms for those who never signed. Rules vary sharply by state.
- Held by production (HBP)
- A lease kept alive past its stated term because a well on the land (or unit) still produces. Most core acreage in mature basins is HBP — meaning no new bonus is coming, and value rides on the wells.
- Landman
- The person who researches titles and negotiates leases for operators or buyers. The ones knocking on doors are usually contractors paid per signed document — worth remembering during the pitch.
- Lateral
- The horizontal section of a modern well, drilled sideways through the target rock for one to three miles or more. Longer laterals are why one well can pay owners across an entire unit.
- Lease (oil and gas)
- A contract renting your minerals to an operator for a term, in exchange for a bonus and a royalty. Rent, not a sale — when it ends, the full bundle of rights returns to you.
- Mineral deed
- The recorded document that conveys mineral ownership in a sale. Once recorded in the county, the transfer is complete — which is why deeds and payment must move together at closing.
- Mineral rights
- Ownership of the oil, gas, and other minerals beneath a tract, separable from the surface. A bundle of rights: to lease, to be paid a bonus, and to collect royalties.
- Net mineral acres (NMA)
- Your fractional share multiplied by the tract’s gross acres: a 1/4 interest in 320 acres is 80 NMA. The standard unit for counting — and pricing — mineral ownership.
- Non-participating royalty interest (NPRI)
- Royalty ownership without executive rights — you share in production revenue but don’t sign leases or collect bonus. Frequently inherited, frequently misunderstood, and frequently mispriced.
- Operator
- The company that drills and runs the wells and sends your royalty checks. Their permits and filings are public — and they foreshadow what happens to your acres next.
- Overriding royalty interest (ORRI)
- A royalty carved out of a lease rather than the land — common compensation for landmen and geologists. It lives and dies with the lease it rides on, which changes its value.
- PDP (proved developed producing)
- Industry shorthand for existing wells already producing — the most certain, most bankable slice of mineral value. A good offer prices PDP and undrilled upside as separate line items.
- Pooling
- Combining multiple tracts into one drilling unit so a well can be drilled and its revenue shared by acreage. How a two-mile lateral pays dozens of families at once.
- Post-production deductions
- Costs — gathering, processing, transportation — some leases let operators subtract before paying royalty. Whether and how heavily they apply lives in your lease language, and gas checks feel them hardest.
- Present value
- What a stream of future payments is worth in today’s dollars after discounting for time and risk. The arithmetic at the heart of every hold-vs-sell decision — and every honest offer.
- Royalty
- Your share of production revenue under a lease — commonly 1/8th to 1/4 — paid free of drilling and operating costs. The mineral owner’s slice of every barrel sold.
- Severance tax
- The state’s tax on produced oil and gas, deducted before royalties are calculated. The reason your check understates your share’s gross value.
- Sight draft
- A check-shaped document payable only after the buyer “verifies title” — letting them take your signed deed while keeping an option on paying you. The classic red flag; legitimate closings wire funds instead.
- Spacing unit
- The state-approved block of land — often 640 to 1,280+ acres — assigned to a well or group of wells. Your decimal is calculated against its size.
- Split estate
- Land whose surface and minerals have different owners — the everyday reality across the producing West, created whenever a seller kept the minerals.
- Stepped-up basis
- The tax reset inherited assets receive: basis becomes fair market value at the date of death, often shrinking the taxable gain if heirs later sell. The most consequential tax fact in family mineral sales.
- Suspense
- Royalties an operator holds — not loses — while ownership documentation catches up, as after a death or sale. Generally released with back pay once title is squared away.
- Title chain
- The sequence of recorded deeds, probates, and conveyances tracing ownership from the original grant to you. Tracing it at the courthouse is the first step of every honest valuation.
- Working interest
- An ownership share in the well itself — paying its share of drilling and operating costs, unlike royalty. Different math, different risk; we buy small non-operated ones case by case.
Missing a word?
Stumped by something on a document?
If a lease, division order, or offer letter uses a term you can’t find here, send it over — we’ll translate it for free, and probably add it to this page.
For the longer story behind these terms, start with Mineral Rights 101 or Division Orders, Explained.
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