SECTION 2. BACKGROUND

Section 1.636–3(a)(1) defines a production payment as a right to a specified share of the production from mineral in place, which is an economic interest in mineral in place and which has an expected economic life (at the time of its creation) of shorter duration than the economic life of the burdened property. The right may be limited by a dollar amount, a quantum of mineral, or a period of time. It may not reasonably be expected to extend in substantial amounts over the entire productive life of the burdened property.