If you are interested in acquiring oil and gas royalty payments, then you’ll need to know how you can get them. Oil and gas royalties are payments that a person or entity will receive if they own the mineral rights or assist in the extraction process of a piece of land that produces and sells valuable minerals. In this article, we will explain the two main kinds of oil and gas royalties and how you can add them to your portfolio.
Royalties from Mineral Rights vs. Overriding Royalty Interests
There are two main kinds of oil and gas royalties: producing mineral rights and overriding royalty interests. The important difference to know between the two is that mineral rights ownership involves actually owning the subsurface of the land producing oil and gas, whereas overriding royalty interests are paid to people or entities that help produce the oil or gas itself.
How to Get Mineral Rights for Oil and Gas Royalties
There are three ways in which you can own mineral rights. You can buy mineral rights, inherit mineral rights, or receive them as a gift. If you purchase a plot of land in a fee simple estate, that means that you own your mineral (subsurface) rights in addition to your surface rights on which you can build. In some states, you may purchase the surface rights of a piece of land while another person or entity may already own the mineral rights below.
How to Receive Oil and Gas Royalty Payments from Mineral Rights
If you own mineral rights or a portion of a piece of land’s mineral rights, then you own a valuable asset. If that land has oil, gas, or another valuable substance extracted from its subsurface, then you will receive a portion of the profits when the minerals are sold. Usually, this comes in the form of a monthly payment. You can also sell your mineral rights as a way to earn a large lump sum.
How to Get Overriding Royalty Interests
If you do not own the mineral rights of a property, you can still earn oil and gas royalty payments in the form of an overriding royalty interest. Overriding royalty interests (ORRI’s) are also given a portion of the sale of extracted oil and gas, however, they are given to those assisting the in drilling and will disappear after the operation is over. ORRI’s are often given to geologists, brokers, landmen, and other people or entities that help bring minerals to the market.