Legal Definitions - executive right

The executive right in oil and gas law refers to the exclusive authority to negotiate and enter into leases for the exploration and production of oil, gas, and other minerals on a specific piece of land. While someone might own the mineral rights beneath a property, the executive right determines who has the sole power to sign a contract with an energy company to drill for those minerals. It essentially grants the holder the exclusive power to decide if and under what terms a mineral lease will be granted.

Here are some examples to illustrate this concept:

• Family Inheritance: Imagine a family where three siblings inherit a large ranch. Their parents' will specifies that while all three siblings own equal shares of the mineral rights beneath the ranch, only the eldest sibling, Sarah, holds the executive right. When an oil company approaches them wanting to lease the mineral rights, Sarah is the only one who can negotiate the terms (such as the royalty percentage and bonus payment) and sign the lease agreement. The other siblings will benefit from the lease (receiving their share of royalties), but they cannot independently lease their portion of the mineral rights or veto Sarah's decision to lease.

• Landowner and Investor: Consider a farmer, Mr. Henderson, who owns a large tract of land. He decides to sell a portion of his mineral rights to an investment firm, "Deep Earth Holdings," but he explicitly retains the executive right for himself. Even though Deep Earth Holdings now owns a percentage of the minerals under Mr. Henderson's farm, they cannot independently lease those minerals to an oil company. Mr. Henderson, as the holder of the executive right, is the only one who can decide whether to enter into a lease agreement, negotiate its terms, and sign the contract. Deep Earth Holdings would then receive their agreed-upon share of any royalties or bonuses generated by the lease Mr. Henderson signs.

• Trust Management: A charitable trust is established, and among its assets are mineral interests under several properties. The trust document specifies that the trustee, Ms. Chen, holds the executive right for these mineral interests. If an energy company expresses interest in drilling on one of the properties where the trust owns mineral rights, Ms. Chen, in her capacity as trustee and holder of the executive right, is the sole individual authorized to negotiate and execute a mineral lease on behalf of the trust. She must act in the best interest of the trust beneficiaries, but the power to make the leasing decision rests exclusively with her.