Certified Trust and Fiduciary Advisor (CTFA) Practice Exam

The right to drill and produce oil and gas in a lease is referred to as a working interest. This designation indicates an ownership stake in the oil or gas production operation, encompassing both the rights to explore and extract resources from the leased land, as well as the obligation to pay a share of the costs associated with drilling and production.

Working interests are essential in the oil and gas industry because they provide the operator or stakeholder with the authority to develop the resource for profit. The holder of a working interest typically bears all the costs and is responsible for the operational decisions regarding the extraction process.

In contrast, the other interests listed—royalty interest, leasehold interest, and surface interest—have different implications and rights associated with them. A royalty interest, for instance, entitles a holder to a portion of the revenue from production without bearing any of the operational expenses. Leasehold interest refers to the rights held under a lease agreement, but it does not inherently include the right to participate in production itself. Surface interest pertains to the rights relating to the surface use of the land, which is separate from the rights to the subsurface resources. Understanding these distinctions is vital for anyone involved in oil and gas leasing.