non-participating royalty interests

Co-author Rusty Tucker

BlueStone Nat. Res. II, LLC v. Nettye Engler Energy, LP is another Texas case deciding whether language creating a nonparticipating royalty interest prohibited deduction of post-production costs. (Spoiler alert: it didn’t. Read on to learn why.)

The Deed

By a 1986 Deed Engler’s predecessors conveyed land to BlueStone’s predecessor. Grantor reserved an undivided 1/8th NPRI in the minerals and was entitled to 1/8th of gross production, “ … to be delivered to Grantor’s credit, free of cost in the pipe line, if any, otherwise free of cost at the mouth of the well or mine … .” (emphasis ours).
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