''For the English land law concept of overriding interest, please see''
Overriding Interest ''For the oil and gas terminology of overriding royalty interest, please'' ''see'' Overriding Royalty Interest.
Overriding interest is an English land law concept. The general rule in registered conveyancing is that all interests and rights over a ...
''.''
An Overriding Royalty Interest (ORRI) is an oil and gas interest is separated from the participatory interest of what is called the working interest. It is percentage of gross production that is not charged with any expenses of from an oil and/or gas well. An ORRI is a
covenant
Covenant may refer to:
Religion
* Covenant (religion), a formal alliance or agreement made by God with a religious community or with humanity in general
** Covenant (biblical), in the Hebrew Bible
** Covenant in Mormonism, a sacred agreement b ...
running with the land between the
assignor and assignee. However, it expires if the associated leases expire.
Calculating ORRI
The overriding royalty interest, for well units, is calculated as follows:
(Overriding Royalty Rate) × (Working Interest) × (Mineral Interest) × (Tract Participation Factor) = ORRI
Where the terms are defined as follows:
* Working interest is the ownership interest that would require the participation in production expenses.
* Mineral interest is the percentage of real property interest after severance of oil and gas from surface rights.
* Tract participation factor is the number of lease acres of the lessor divided by total number of acres.
[Alyce-Hoge-Allocation-Wells.pdf (landtraining.net)]
References
Oil and gas law
Contract law