This lease rider form may be used when you are involved in a lease transaction, and have made the decision to utilize the form of Oil and Gas Lease presented to you by the Lessee, and you want to include additional provisions to that Lease form to address specific concerns you may have, or place limitations on the rights granted the Lessee in the “standard” lease form.
The Arkansas Reservation of Additional Interests in Production is a legal concept used in the oil and gas industry. It refers to a specific provision in oil and gas leases that allows the lessor (the landowner) to retain certain interests or benefits from the production of oil and gas on their land. Under this reservation, the lessor retains the right to receive a share of the oil and gas production, beyond the standard royalty payments, known as the "additional interests." These additional interests may include a percentage of the net proceeds from the sale of oil and gas or a certain volume of oil and gas produced annually. The purpose of the Arkansas Reservation of Additional Interests in Production is to ensure that the lessor continues to benefit from the lease even after the primary term expires or if production continues beyond the primary term. It provides an avenue for the lessor to participate in the success of the well beyond the initial lease agreement. There are different types of Arkansas Reservation of Additional Interests in Production, which vary based on the negotiation between the lessor and the lessee (oil and gas company). Some types include: 1. Overriding Royalty Interest (ORRIS): In this type, the lessor retains a fixed percentage (typically 1-3%) of the oil and gas production as additional royalty, regardless of the primary lease royalty terms. 2. Carried Interest: Under this provision, the lessor receives a percentage share of the production without incurring any costs or expenses associated with drilling, operation, or maintenance of the wells. 3. Back-in Interest: In certain cases, the lessor may reserve the right to regain a working interest in the lease after a predetermined period or specific production threshold is met. This allows the lessor to actively participate in future drilling activities and share costs and profits proportionately. 4. Net Profit Interest (NPI): This type grants the lessor a percentage share in the net profits from the oil and gas production. Net profit is calculated by deducting the operating costs, including production, transportation, and marketing expenses, from the sales revenue. It is important to note that the specific terms and conditions of the Arkansas Reservation of Additional Interests in Production can vary widely from lease to lease, depending on the negotiation between the parties involved. It is crucial for both the lessor and the lessee to carefully review and understand the implications of these provisions before entering into an agreement. Legal advice from an attorney experienced in oil and gas leasing is highly recommended ensuring all parties' interests are safeguarded.
