Like most subjects, understanding oil and gas law is often a matter of knowing the terminology – WI, RI, ORRI, NPRI. These terms are often used in a confusing way and the definitions sometimes overlap. So I’m going to try to clear things up.
It all starts with the mineral estate. In Texas, the mineral estate can be separated (“severed”) from the surface estate. This can be done either by a conveyance or a reservation. I grant Blackacre to John Doe, reserving the mineral estate; or I convey the mineral estate in Blackacre to John Doe. The mineral estate is considered an ownership interest in land, just like the surface estate. It carries with it certain rights – the right to explore for and extract the minerals under the land. To make that right effective, the owner of the mineral estate must have the right to use the surface estate – to go on the land and drill wells. So the mineral estate is called the “dominant estate,” because the surface estate is subject to the rights of the owner of the mineral estate to use the land to extract minerals.
The mineral owner may grant an oil and gas lease to an exploration company to drill wells on the land. In Texas, an oil and gas lease is a conveyance to the lessee of the mineral estate for the term of the lease, reserving a royalty interest. An oil and gas lease severs the mineral estate into two interests – the lessee’s interest, often called the “working interest,” and the reserved royalty interest. When the lease expires, those two estates merge back together into the mineral estate.