An Alaska Assignment of Overriding Royalty Interest with Proportionate Reduction is a legal document that transfers the rights to receive a portion of the royalty payments from an oil, gas, or mineral lease in Alaska. It is a commonly used agreement in the energy industry to allocate the interest in a lease among multiple parties. In this assignment, the assignor, who is the current owner of the overriding royalty interest, transfers a portion or all of their interest to the assignee. The assignee becomes the new owner of the overriding royalty interest and is entitled to receive a proportional share of the royalty payments from the lease. There are several types of Alaska Assignment of Overriding Royalty Interest with Proportionate Reduction, depending on the specific circumstances and provisions included in the agreement. These types can include: 1. Partial Assignment: In this type, the assignor transfers only a portion of their overriding royalty interest to the assignee. The assignee will receive a proportionate share of the royalties based on the assigned interest. 2. Full Assignment: In a full assignment, the assignor transfers their entire overriding royalty interest to the assignee. The assignee will then receive the full amount of the royalty payments from the lease. 3. Proportionate Reduction: This provision is commonly included when multiple parties hold overriding royalty interests in the same lease. It ensures that each party's interest is reduced proportionally if there are changes to the overall royalty percentage. For example, if the royalty percentage is reduced due to a lease amendment, each party's interest will be proportionately reduced to reflect the new royalty rate. 4. Assignment of Future Interests: This type of assignment grants the assignee the rights to receive future overriding royalty interest payments from the lease. It may be used when the lease is expected to have extended periods of production. It is important to note that an Alaska Assignment of Overriding Royalty Interest with Proportionate Reduction should be prepared by legal professionals familiar with Alaska's specific laws and regulations. Furthermore, it should clearly define the parties involved, the specific interest being assigned, any conditions or limitations, and the royalty payment calculations. Furthermore, it is also advisable to include provisions for dispute resolution, rights of first refusal, and confidentiality, among others, to protect the interests of all parties involved.
Alaska Assignment of Overriding Royalty Interest with Proportionate Reduction
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FAQ
Overriding Royalty Interest: A given interest severed out of the record title interest or lessee's share of the oil, and not charged with any of the cost or expense of developing or operation. The interest provides no control over the operations of the lease, only revenue from lease production.
However, unlike royalty and working interests, an overriding royalty interest cannot be fractionalized unlike royalty and working interests. The ORRI is a non-possessory, undivided right to a share of the oil and gas production, but it excludes the production costs of the mineral lease.
Royalty interest in the oil and gas industry refers to ownership of a portion of a resource or the revenue it produces. A company or person that owns a royalty interest does not bear any operational costs needed to produce the resource, yet they still own a portion of the resource or revenue it produces.
How to calculate the overriding royalty interest? ORRI = NRI * 5 percent. $750,000 * 0.005 = $3,750.
Overriding royalty interest: Unlike mineral and royalty interests, an overriding royalty interest runs with a lease and not with the land. Therefore, they only remain in effect for as long as a lease is in effect and they expire when a lease expires.
To calculate the number of net royalty acres I'm selling, I use this formula: [acres in tract] X [% of minerals owned] X 8 X [royalty interest reserved in lease] X [fraction of royalty interest being sold]. 640 acres X 25% X 8 X 1/4 X 1/2 = 160 net royalty acres.
The value of an overriding royalty interest is simple to calculate since it is a percent of the working interest lease. The ORRI value is based on production on the acreage leased by the working interest.
Essentially, NPRI is the royalty severed from minerals just as minerals are severed from the surface interest. Unlike mineral owners, non-participating royalties do not have executive rights in lease negotiations, leasing incentives, or rental payments. They just receive the actual production proceeds.
