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 is received from a working interest, royalty payment, shut-in well payment, take-or-pay payment, bonus or delay rental or any other interest not provided for in Paragraph (1) or (2) of this subsection, the amount that is allowed as a deduction from gross income for depletion purposes under the federal income tax law in effect at the time of severance shall be allocated to principal and the balance to income. If the amount that is allowed as a deduction is less than fifteen percent of gross income for depletion purposes, or if depletion is not allowed, then the amount to be allocated to principal and the amount to be allocated to income shall be determined in accordance with Section 104 [46-3A-104 NMSA 1978]. (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 percent of the amount must be allocated to principal and the balance to income. (c) The Uniform Principal and Income 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 the Uniform Principal and Income Act, the trustee may allocate receipts from the interest as provided in that act or in the manner used by the trustee before the effective date of that act. If the trust acquires an interest in minerals, water or other natural resources after the effective date of the Uniform Principal and Income Act, the trustee shall allocate receipts from the interest as provided in that act.