14-7420. Minerals, water and other natural
resources
A. To the extent that a trustee accounts for receipts from an interest in minerals
or other natural resources pursuant to this section, the trustee shall allocate them as
follows:
1. If received as nominal delay rental or nominal annual rent on a lease, a receipt
must be allocated to income.
2. If received from a production payment, a receipt must be allocated to income if
and to the extent that the agreement creating the production payment provides a factor
for interest or its equivalent. The balance must be allocated to principal.
3. If an amount received as a royalty, shut-in-well payment, take-or-pay payment,
bonus or delay rental is more than nominal, ninety per cent must be allocated to
principal and the balance to income.
4. If an amount is received from a working interest or any other interest not
provided for in paragraph 1, 2 or 3, ninety per cent of the net amount received must be
allocated to principal and the balance to income.
B. An amount received on account of an interest in water that is renewable must be
allocated to income. If the water is not renewable, ninety per cent of the amount must be
allocated to principal and the balance to income.
C. This article applies whether or not a decedent or donor was extracting minerals,
water or other natural resources before the interest became subject to the trust.
D. If a trust owns an interest in minerals, water or other natural resources on the
effective date of this article, the trustee may allocate receipts from the interest as
provided in this article or in the manner used by the trustee before the effective date
of this article. If the trust acquires an interest in minerals, water or other natural
resources after the effective date of this article, the trustee shall allocate receipts
from the interest as provided in this article.
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