Mineral ownership can be complex- there are a number of different ways to own mineral rights. Mineral rights can be inherited, purchased, or given via court order. Understanding the different types of mineral rights ownership is helpful when navigating the world of oil and gas exploration, leasing, and production.
Mineral ownership constitutes the right to explore for and produce oil and gas beneath the surface of the earth. Property owners can own both the surface and the mineral rights on a tract of land, or they can own the surface or the minerals separately.
Royalty interest owners are entitled to a percentage of the well's revenue without having to pay for any of the expenses associated with drilling or operating the well. A mineral owner receives a royalty interest in producing oil & gas wells. This percentage varies per lease agreement.
What is the difference between royalty and mineral rights?
A mineral interest entails the ownership of real property (ie; the minerals below the surface of land), while a royalty interest grants an owner a portion of the production revenue from a well. Once drilling stops or a lease expires, the royalty interest is also removed. If you own a mineral interest and drilling stops, you still own the mineral interest.
Working interest includes the right to explore, develop, and produce minerals granted through an oil & gas lease. Essentially, if you own a working interest, you are participating with the operator as a partner in drilling the well. As a partner with the operator of the lease, you are responsible for all the drilling, completion, and operational costs. Each month you will be entitled to your share of the income from operations, but also your share of the expenses.
Overriding Royalty Interest
An overriding royalty interest (ORRI) is a percentage of gross revenue from an oil and gas lease that is free of the costs of production or operation. In other words, an ORRI is an interest in the proceeds of the sale of oil & gas rather than an interest in the actual mineral rights. The owner of an ORRI does not bear any costs associated with the exploration, drilling, or operating processes, and therefore receives a higher percentage of income compared to other types of mineral rights ownership.
Non-Participating Royalty Interest
A non-participating royalty interest (NPRI) is another type of mineral interest that allows the owner to receive a percentage of the revenue from oil and gas production, but without any right to participate in lease negotiations or operations. This means that the NPRI owner does not have any decision-making power regarding the management of the mineral rights.
The executive right holder is the party that has the right to take or authorize actions that affect the exploration and development of a mineral estate. The executive rights owner can negotiate and execute a lease with a drilling company and collect the lease bonus.
If you are a mineral interest owner, you can receive a free report with estimates for the lease and sale values for your minerals by finding your property on our map: