Understanding the Key Differences and What You Actually Own
Many mineral owners are surprised to learn that mineral rights and royalty interests are not the same thing. Understanding what you own is the first step to making informed decisions about your assets.
Whether you inherited mineral interests, purchased them, or have owned them for generations, knowing exactly what type of ownership you have affects your options and opportunities.
The terms "mineral rights" and "royalties" are often used interchangeably, but they represent different types of ownership with distinct characteristics. This confusion can lead to misunderstandings when reviewing documents, receiving offers, or making decisions about your assets.
At Buckhead Energy, we work with mineral owners every day who have questions about their ownership. This guide will help clarify the differences so you can better understand your position and options.
Mineral Rights: Full ownership of subsurface resources
Royalty Interest: Receive production income only
Both: Can be bought, sold, or inherited
Mineral rights represent ownership of the oil, gas, coal, metals, and other resources beneath the surface of the land.
Leasing Authority: The right to negotiate and sign oil and gas leases
Bonus Payments: Upfront payments when signing a new lease
Delay Rentals: Annual payments to maintain an undrilled lease
Royalty Income: Percentage of production revenue
Executive Rights: Authority to make decisions about the minerals
Complete ownership of all mineral rights, including all associated benefits and the authority to lease, sell, or transfer.
Mineral rights that have been separated from the surface ownership. The mineral owner and surface owner are different parties.
A royalty interest is the right to receive a portion of production revenue without the other benefits that come with full mineral ownership.
Created when a mineral owner leases their minerals and retains a royalty. This is a perpetual interest that continues as long as the minerals are owned.
Carved out of the working interest during a lease assignment. ORRIs expire when the underlying lease terminates and do not survive into subsequent leases.
A carved-out royalty interest that does not include leasing rights or bonus payments. The NPRI owner receives royalties but cannot negotiate lease terms.
Production Revenue: A percentage of oil and gas sales
No Operating Costs: Royalty owners are not responsible for drilling or production expenses
Passive Income: Revenue without active involvement in operations
Lease bonus payments (unless specifically included)
Delay rental payments
Authority to negotiate lease terms
Executive rights to make leasing decisions
| Feature | Mineral Rights | Royalty Interest |
|---|---|---|
| Ownership Type | Full ownership of subsurface resources | Right to receive production income |
| Lease Authority | Yes - can negotiate and sign leases | No - cannot lease |
| Bonus Payments | Yes - receives upfront bonus | No (typically) |
| Delay Rentals | Yes - annual lease payments | No |
| Royalty Income | Yes - percentage of production | Yes - percentage of production |
| Operating Costs | Not responsible | Not responsible |
| Duration | Perpetual (unless sold) | Varies - some perpetual, some lease-dependent |
| Can Be Sold | Yes | Yes |
Understanding your specific ownership type requires reviewing your documentation. Here's where to look:
Your deed will specify what type of interest was conveyed. Look for language like "mineral interest," "royalty interest," or "non-participating royalty."
If you inherited your interest, the probate documents and will should describe what was transferred to you.
Your check stubs may indicate the type of interest. Look for descriptions like "RI" (royalty interest) or "ORRI" (overriding royalty).
Buckhead Energy can help you review your ownership and explain what you have. Our team works with mineral owners every day and can provide clarity on your specific situation at no cost.
Whether you own mineral rights or a royalty interest, you have options for how to manage your asset.
Hold and Lease: Continue collecting bonus payments and royalties
Sell All: Convert your entire interest to immediate capital
Sell a Portion: Sell part of your interest while retaining some ownership
Create a Royalty: Sell the minerals but retain a royalty interest
Hold: Continue receiving your share of production revenue
Sell All: Convert your royalty stream to immediate capital
Sell a Portion: Sell part of your royalty while keeping some income
Every owner's situation is different. Some prefer the ongoing income, while others find that converting to capital better serves their current needs. There's no right or wrong answer - it depends on your personal circumstances and goals.
Mineral rights represent ownership of subsurface resources and include the right to lease, receive bonus payments, and collect royalties. Royalty interests only entitle the owner to a percentage of production revenue without other ownership rights like leasing authority.
Yes, royalty interests can be bought and sold independently. Many owners choose to sell royalty interests while others sell their full mineral rights. Both options provide flexibility depending on your situation.
An overriding royalty interest is a percentage of production revenue carved out of the working interest, typically created during lease assignments. ORRIs expire when the underlying lease terminates, unlike mineral royalties which are perpetual.
Not necessarily. Mineral rights and surface rights are often severed, meaning they can have different owners. When you own mineral rights, you own the subsurface resources but may not own the land above them.
Mineral rights typically have more value because they include additional benefits like lease bonuses and the authority to negotiate lease terms. However, both can be valuable assets depending on the specific property and production characteristics.
Yes, both mineral rights and royalty interests can be passed down through inheritance. They are treated as real property and will transfer according to the owner's will or state intestacy laws if there is no will.
We're happy to help you understand what you own
Whether you own mineral rights, royalty interests, or aren't quite sure, Buckhead Energy can help provide clarity. We'll review your documents and explain your ownership at no cost or obligation.
Disclaimer: This information is provided for educational purposes only and does not constitute legal, tax, or investment advice. Mineral rights and royalty interests involve complex legal considerations that vary by state and individual circumstances. You should consult with a qualified attorney for specific legal advice regarding your ownership interests. Buckhead Energy does not provide legal, tax, or investment advice.