Legal Definitions - nonapportionment rule

The nonapportionment rule is a legal principle primarily applied in oil and gas law. It addresses how royalties are distributed when a piece of land, already subject to a mineral lease, is subsequently divided into smaller parcels. Under this rule, if a producing well is later drilled on one of these subdivided parcels, all the royalties generated from that well belong exclusively to the owner of the specific parcel where the well is located. The owners of the other subdivided parcels, even though their land was part of the original larger tract covered by the same lease, are not entitled to share in those royalties.

• Example 1: Farm Subdivision

  Imagine Mr. Thompson owns a 300-acre farm and grants a mineral lease to "Deep Earth Energy Co." A year later, Mr. Thompson sells a 75-acre section of his farm to Ms. Davis. Subsequently, Deep Earth Energy Co. drills a successful natural gas well on the *remaining 225 acres* still owned by Mr. Thompson.

  How it illustrates the rule: Under the nonapportionment rule, all royalties generated from the natural gas well belong exclusively to Mr. Thompson. Ms. Davis, despite her 75 acres being part of the original leased property, receives no share of the royalties because the producing well is not located on her specific parcel.

• Example 2: Inherited Land Division

  The Chen family jointly owns a large 400-acre ranch. They grant a mineral lease to "PetroCorp Inc." A few years later, the family decides to divide the ranch equally among four cousins: Li, Mei, Wei, and Jian, with each receiving approximately 100 acres. Later, PetroCorp Inc. drills a productive oil well on the parcel now owned by Li.

  How it illustrates the rule: According to the nonapportionment rule, Li is entitled to 100% of the royalties from the oil well. Mei, Wei, and Jian, even though their land was part of the original leased tract and they are family members, will not receive any royalties because the producing well is not situated on their respective subdivided parcels.