This provision provides for the assignor to except from this assignment and reserve an overriding royalty interest of all oil, gas, casinghead gas, and other minerals that may be produced from the lands under the terms of the Leases that are the subject of this assignment.
Kentucky Reservation of Overriding Royalty Interest (LORI) is a legal provision that grants individuals or entities the right to collect a percentage of the revenue generated from oil, gas, or mineral extraction on a specific property. In this detailed description, we will explore the various aspects of LORI in Kentucky and highlight its different types, thereby using relevant keywords. 1. Definition of Kentucky Reservation of Overriding Royalty Interest: The Kentucky Reservation of Overriding Royalty Interest refers to a contractual agreement that allows a party (the overriding royalty interest holder) to receive a specific portion of the revenue generated from oil, gas, or mineral extraction operations conducted on a specific property, without having an ownership interest in the property itself. 2. Purpose and Role: LORI serves as an incentive for parties who contribute to lease agreements or exploration activities by providing them a share in the generated revenue. It helps to attract potential investors, incentivize landowners, and encourage the exploration and development of oil, gas, and mineral resources in Kentucky. 3. Determination of Royalty Interest: The percentage of royalty interest, also known as the override, is typically negotiated and specified in the lease or contractual agreement. It can vary depending on factors like the property's location, the specific resource being extracted, market conditions, and the expertise of the overriding royalty interest holder. 4. Different Types of Kentucky Reservation of Overriding Royalty Interest: a) Fractional Overriding Royalty Interest: This type refers to a predetermined fraction of the total revenue earned from resource extraction. For example, a 1/8 fractional overriding royalty interest would entitle the holder to 12.5% of the revenues generated. b) Fixed Overriding Royalty Interest: In this type, a fixed percentage, typically exceeding 15%, is agreed upon, granting the overriding royalty interest holder a predetermined share of the revenue generated. It remains constant regardless of the fluctuating market conditions or production rates. c) Variable Overriding Royalty Interest: This type of LORI allows for adjustments based on production levels, drilling depth, commodity prices, or other factors specified in the agreement. The overriding royalty interest holder's percentage may change periodically, aligning with the varying production rates or market dynamics. d) Area-Based Overriding Royalty Interest: This type applies when the overriding royalty interest holder's interest is not tied to a specific tract but covers a defined area. The set percentage is calculated based on the total revenue generated from all qualifying properties within that area. 5. Legal Framework and Contractual Agreements: The establishment of LORI in Kentucky is subject to specific legal regulations and guidelines. Leases and contracts between mineral rights owners and overriding royalty interest holders outline the terms, conditions, and obligations of both parties, providing a legal framework for revenue distribution and dispute resolution. 6. Benefits and Considerations: Kentucky Reservation of Overriding Royalty Interest offers several benefits to all involved parties. Landowners gain potential additional income without having to bear the costs and risks associated with exploration and production operations. Industry professionals and investors receive a share of the profits without owning the underlying real estate. However, it is essential for all parties to seek legal advice and thoroughly understand the terms and implications of LORI contracts before entering into any agreements. In conclusion, Kentucky Reservation of Overriding Royalty Interest creates a mutually beneficial arrangement for landowners, industry professionals, and investors involved in oil, gas, and mineral extraction. By incorporating various types of overriding royalty interest, it provides flexible options to accommodate the specific needs and circumstances of each party involved in resource development activities in Kentucky.
