One of the most common misunderstandings for mineral owners is their understanding of the actual amount of mineral acreage that they own. The lack of transparency in the industry combined with confusing deed language oftentimes compounds this misunderstanding. Let’s briefly discuss the three most common “units of measurement” for mineral acreage.
GROSS ACRES
Just as your “gross” income does not accurately reflect your take-home pay (after all, you need to pay taxes on that gross income, then, what’s left over is your “net” income), the gross acreage does not accurately reflect your specific ownership. Whenever you see “Gross Acres” referenced, this is the total amount of acreage in a given tract of land. The vast majority of the time, there are multiple owners who own within a given tract. Therefore, each owner owns some part of that gross acreage. Let’s look at this another way and define “Net Mineral Acres”.
NET MINERAL ACRES (NMA)
This is the number you want to pay attention to as it most accurately represents your specific ownership. Net Mineral Acres (most commonly referred to by its acronym “NMA”) are the “net” acres that an individual owner owns out of the total gross acreage. Here’s a hypothetical scenario:
The gross acreage of a given tract is 640 gross acres. There are 4 mineral owners in the tract. For the purposes of this exercise, let’s assume that all of their acreage is leased at a 25% royalty.
- Jim Barker owns 40 NMA
- Helen Dickinson owns 180 NMA
- Janice Holland owns 195 NMA
- Bruce Williams owns 225 NMA
Total: 640 gross acres
NET ROYALTY ACRES (NRA)
You may hear folks (mineral buyers primarily) speak in terms of “Net Royalty Acres” or NRA. Don’t be confused -- NRA is simply your NMA assuming it was leased at 1/8th (12.5%). The Net Royalty Acre nomenclature was first established back when the standard royalty on a lease was 1/8th. So, it was very easy to say that 1 NMA leased at a 1/8th royalty was equal to 1 NRA. Pretty simple, right? Nowadays, the standard lease royalty has changed quite a bit, so a calculation is often necessary to convert your NMA to NRA.
Here is the calculation:
- Convert your royalty from a fraction or percentage to a decimal.
- Divide that decimal by 0.125 (which is equivalent to 12.5% or 1/8th)
- Multiply that number by your NMA, and voilà! That’s your NRA.
Here are a few examples:
Jim Barker (remember him?) owns 40 NMA leased at a 25% royalty.
- 25% = 0.25
- 0.25 / 0.125 = 2
- 2 x 40 = 80
So, Jim owns 80 NRA.
Let’s look at a new owner, Eric Shaw. He owns 60 NMA at a 12.5% royalty. Since his ownership is already represented in terms of a 1/8th lease, then no conversion is necessary. We can simply conclude that Eric owns 60 NRA.
One more: Miss Amy Brown. She owns 74.23 NMA at a 3/16th royalty.
- 3 / 16 = 0.1875
- 0.1875 / 0.125 = 1.5
- 1.5 x 74.23 = 111.345
So, Amy owns 111.345 NRA.
If you’re confused about your lease royalty, and what that means, be sure to check our Royalty explanation here.