A mineral interest is ownership of the oil, gas and other minerals under a tract, with the right to develop or lease them. A royalty interest is a share of production, paid free of drilling and operating costs, with no right to lease. Both are called mineral rights in everyday speech, but buyers price them differently. The mineral rights vs royalty interests question comes down to control. This guide explains the types of mineral interests, how each is created, and how to tell which you own.
Surface rights vs mineral rights: the two estates
The Kansas Geological Survey defines mineral rights as ownership of the mineral resources under a tract, separate from the surface estate above them. Severance happens when an owner sells the surface and keeps the minerals by reservation, or deeds the minerals away and keeps the surface. In Texas, Texas A&M AgriLife Extension notes, severances often happened generations ago, so many surface owners do not know whether they hold any mineral rights.
The Bureau of Land Management calls the result a split estate and notes that mineral rights often take precedence over other rights in development. If you only own the surface, you have no mineral interest to sell. Our guide on whether you own mineral rights covers the records check.
What a mineral interest includes
A full mineral interest is a bundle of rights. Texas A&M AgriLife Extension lists the executive right, bonus and royalty among them, and notes that mineral rights can be divided by percentage or by individual rights. Five pieces make up the bundle:
- The right to develop: to explore for and produce the minerals
- The executive right: to negotiate and sign an oil and gas lease
- The right to bonus: the upfront payment for a lease
- The right to delay rentals: payments that keep a lease alive before drilling
- The right to royalty: a share of production
An owner who holds all five has a full mineral interest. Each piece can be deeded away separately, so two people can own mineral rights in the same tract with different powers. Executive rights matter most to a buyer, because they control leasing.
Royalty interest: production without executive rights
A royalty interest is a share of what a well produces, free of drilling and operating costs, with no right to lease and no bonus or delay rentals. The Kansas Geological Survey describes the royalty clause as the share of production reserved to the owner of the mineral rights, usually 1/8 in older leases; modern leases often reserve more. The landowner's royalty under a lease is the most common royalty interest, and it belongs to whoever holds the mineral rights when the lease is signed.
Non-participating royalty interest (NPRI)
A non-participating royalty interest is a royalty carved out of the mineral estate by deed or reservation. It survives any lease, but its owner takes no part in leasing, bonus or delay rentals. Texas A&M AgriLife Extension explains that when someone else holds the executive right, the non-participating owner depends on that executive's decisions, and Texas courts hold that executive to a duty of good faith. An NPRI is still mineral rights in the broad sense, but it is narrower than a full mineral interest.
Overriding royalty interest (ORRI)
An overriding royalty interest is carved out of the lessee's working interest, not out of the mineral rights. It is a share of production free of costs, and it lasts only as long as the lease it came from. Federal leasing rules (43 CFR 3100.5) treat an overriding royalty as a purely financial interest, severable from the lease record title. When the lease expires, the ORRI expires with it; a mineral interest or an NPRI does not.
Working interest
Federal rules define the operating right, or working interest, as the interest created out of a lease that lets its holder drill and produce. The holder pays drilling and operating costs and keeps what is left after royalties. In Oklahoma, the Corporation Commission notes that a spacing order divides each unit into the royalty interest and the working interest. Each unleased working interest owner there may drill, so an owner of mineral rights who never leases holds an unleased mineral interest that can be pooled.
How each type of mineral interest is created
- Mineral deed or reservation: creates a mineral interest, or a fraction of one, and can carve out an NPRI or hold back executive rights
- Oil and gas lease: creates the lessee's working interest and reserves the landowner's royalty to the owner of the mineral rights
- Assignment: transfers a working interest between companies, and is where an overriding royalty interest is usually reserved
Mineral rights pass by deed, will or inheritance, and each transfer is recorded in the county where the land sits; the Oklahoma Corporation Commission notes that mineral ownership is a matter of record in that county's courthouse.
How to tell which mineral interest you own
Start with the deed that brought the mineral rights to you. "All the oil, gas and other minerals in and under" points to a mineral interest. "A royalty of 1/16 of all oil and gas produced", with no right to lease, points to a royalty interest. A reservation of "the executive right" in an earlier deed means someone else controls leasing of those mineral rights.
Texas A&M AgriLife Extension notes that a division order or royalty check may show your percentage of ownership; a division order often labels the type too: RI for royalty, OR for overriding royalty, WI for working interest. If the wording is unclear, an oil and gas attorney or landman can run the chain of title and tell you which mineral interest you hold. That is the one professional check worth paying for before you sell mineral rights.
Which types buyers purchase, and why prices differ
Buyers purchase every one of these mineral rights, but not on the same terms. A mineral interest is valued on what it could earn: lease bonus, royalty from wells not yet drilled, and control through the executive right. An NPRI or a landowner's royalty is valued on production, since the owner cannot lease. A working interest carries costs, so it usually trades between operators rather than buyers of mineral rights.
Two owners can hold the same net acres and receive different offers because one holds a full mineral interest and the other a royalty interest. Executive rights, the lease royalty rate and producing wells all move the number. Our mineral rights value calculator shows how those inputs change an estimate.
Selling a mineral interest or royalty interest through us
GoSellMineralRights connects owners of mineral rights with up to three independent buyers, and owners pay nothing. You can request offers through us on a mineral interest, a royalty interest, an NPRI or an overriding royalty, and each buyer prices your interest on its own terms. Get offers on your mineral rights, or read about selling a royalty interest and selling an overriding royalty.
This guide is general information, not legal advice. Mineral rights law varies by state, and your own documents' wording controls what you own.