§ 2-3-821 — 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:
(i) If received as nominal delay rental or nominal
annual rent on a lease, a receipt must be allocated to income;
(ii) 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;
(iii) If an amount received as a royalty, shut-in-
well payment, take-or-pay payment, bonus or delay rental is more
than nominal, twenty-seven and one-half percent (27.5%) must be
allocated to principal and the balance to income;
(iv) If an amount is received from a working interest
or any other interest not provided for in paragraph (i), (ii) or
(iii) of this subsection, twenty-seven and one-half percent
(27.5%) 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, twenty-seven and one-half percent (27.5%) of the
amount must be allocated to principal and the balance to income.
(c) This act 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 act, the
trustee may allocate receipts from the interest as provided in
this act or in the manner used by the trustee before the
effective date of this act. If the trust acquires an interest in
minerals, water or other natural resources after the effective
date of this act, the trustee shall allocate receipts as
provided in this act.