Define: Apportionment Rule

The apportionment rule is a legal principle that governs oil and gas leases on divided land during the lease term. It stipulates that if the land is sold to multiple owners, each owner has the right to receive a portion of the royalties from the lease based on their ownership interest in the land. For instance, if two individuals own equal shares of the land, they would each be entitled to receive half of the royalties. This rule is specifically observed in California, Mississippi, and Pennsylvania.

The apportionment rule is a legal principle that applies to oil and gas leases. It states that if a piece of land is divided during the lease term, the royalties accrued under the lease must be shared by the landowners in proportion to their interests in the land. For example, if Grey granted a lease to Simms for a piece of land and later sold half of the land to Metcalfe, according to the apportionment rule, Simms and Metcalfe would each be entitled to half of any royalty from the land, regardless of the location of the producing well. It is important to note that only three states in the United States follow this rule: California, Mississippi, and Pennsylvania. The majority of states follow the nonapportionment rule, where royalties are not divided among the landowners based on their interests in the land. The apportionment rule ensures that each landowner receives a fair share of the royalties from the oil and gas produced on the land, preventing one landowner from receiving an unfair amount simply because the producing well is on their portion of the land.

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This glossary post was last updated: 16th April 2024.