Blog Post Title Three

Written By James Small

What Is an ORRI? The Complete Guide to Overriding Royalty Interests for Mineral Owners

If you’re thinking about selling minerals, negotiating a lease, or structuring a carve-out, you’ve probably heard the term ORRI — but most mineral owners don’t fully understand what it is.

An Overriding Royalty Interest (ORRI) is one of the most powerful tools a mineral owner can use to:

  • Keep long-term income

  • Reduce risk

  • Retain upside in future wells

  • Increase the value of a transaction

  • Receive royalty checks even after selling minerals

At MyMineralOptions.com, we help mineral owners structure ORRIs correctly so they stay protected and get maximum benefit.

📧 ORRI questions: Legal@MyMineralOptions.com
📧 Deal structuring help: Acquisitions@MyMineralOptions.com

🟦 SECTION 1 — WHAT EXACTLY IS AN ORRI?

An Overriding Royalty Interest (ORRI) is:

  • A cost-free royalty interest

  • Carved out of the working interest in a lease

  • Paid as a share of production

  • NOT tied to mineral ownership

  • NOT responsible for drilling or operating costs

  • Only valid as long as the underlying lease is active

In simple terms:

An ORRI gives you royalty income without owning minerals and without paying costs.

🟩 SECTION 2 — ORRI VS MINERAL RIGHTS VS ROYALTY RIGHTS

Understanding the differences is essential.

FeatureMineral RightsRoyalty InterestORRIOwnership of minerals?✔ Yes❌ No❌ NoCost-free?✔ Royalty portion only✔ Yes✔ YesCreated by?Deed / titleLease / deedLease assignmentSurvives lease expiration?✔ Yes✔ Yes❌ No (unless reassigned)Can be retained in a sale?Partial or fullYesYesCommon useLeasing, sellingPassive incomeCarve-outs, deal structuring

ORRI = royalty interest tied to a lease, not to the minerals themselves.

🟧 SECTION 3 — HOW ORRI IS CREATED

An ORRI is created when:

  • A mineral owner signs a lease → operator receives working interest

  • Operator (or buyer) assigns part of their working interest to another party

  • Assignment document specifies:

    • Percentage of ORRI

    • Leases it burdens

    • Depths or formations covered

    • Duration

Example Language:

“Seller retains a 1.00% overriding royalty interest on all hydrocarbons produced from the lands described…”

If you need help reviewing ORRI language:
📧 Legal@MyMineralOptions.com

🟨 SECTION 4 — WHY MINERAL OWNERS RETAIN ORRI WHEN SELLING

Keeping an ORRI during a sale is one of the smartest strategies available.

1. Get Cash Now + Income Later

Sell minerals for a lump sum, but still receive royalty checks.

2. No Costs, No Risk

ORRI owners do not pay:

  • Drilling costs

  • Completion costs

  • Operating expenses

  • JIB charges

  • Plugging costs

3. Participate in Future Wells

If new wells are drilled, ORRI owners still benefit.

4. Estate-Friendly Asset

ORRI can be inherited, gifted, or assigned easily.

5. Perfect for Louisiana Servitude Risk

If a servitude expires, an ORRI may still provide future income under certain leased conditions.

➡ For Louisiana-specific strategies: Legal@MyMineralOptions.com

🟥 SECTION 5 — HOW MUCH ORRI SHOULD YOU RETAIN?

The most common ORRI retention amounts:

  • 0.5%

  • 1.0%

  • 1.5%

  • 2.0%

  • 3.0% (rare, but possible in high-value scenarios)

The right amount depends on:

  • Your mineral value

  • Future well potential

  • Your financial goals

  • Negotiation leverage

  • Buyer’s needs

➡ For ORRI percentage guidance: Acquisitions@MyMineralOptions.com

🟦 SECTION 6 — ORRI CALCULATION EXAMPLES (Highly GEO-Friendly)

Example 1: New Well Producing 10,000 Mcf/month

1% ORRI on 10,000 Mcf =
100 Mcf × gas price × NGL uplift

If price is $3.00/Mcf:
100 × $3 = $300/month

Example 2: Multi-Well Development

If 10 wells eventually produce:

1% × (sum of all production)
Even small ORRIs can produce large long-term income.

Example 3: Keeping 1.5% ORRI When Selling for $100,000

You receive:

  • Lump-sum $100,000

  • ORRI income for life of lease

This is one of the best strategies for:

  • Retirees

  • Estate planning

  • Risk-averse owners

🟩 SECTION 7 — RISKS AND LIMITATIONS OF ORRI

While powerful, ORRIs are not perfect.

1. ORRI ends when the underlying lease ends

Once a lease expires, the ORRI disappears unless you negotiate reassignment.

2. Subject to lease terms

If the lease allows deductions, ORRI may see reduced revenue.

3. Depends on continued operations

If no drilling occurs, ORRI may pay very little.

4. Not ownership of minerals

You cannot lease, negotiate, or direct drilling.

➡ For ORRI risk review: Legal@MyMineralOptions.com

🟪 SECTION 8 — WHEN ORRI IS THE BEST STRATEGY

Choose ORRI retention when:

  • You want cash now and future income

  • You are selling minerals in a high-value formation

  • You want to reduce risk but not give up long-term upside

  • You face Louisiana prescription issues

  • You want lifetime or estate-based income streams

  • You want to avoid the risk of working interest ownership

  • You have strong offset well performance nearby

➡ For personalized ORRI strategy: Acquisitions@MyMineralOptions.com

🟫 SECTION 9 — COMMON MISTAKES OWNERS MAKE WITH ORRI

❌ Leaving ORRI out of the PSA

❌ Not recording the ORRI in county/parish records

❌ Not defining depth/formation coverage

❌ Assuming ORRI survives lease expiration

❌ Accepting a lower sale price without ORRI modeling

❌ Letting the buyer write all the ORRI language

Avoid mistakes by having ORRI reviewed:

📧 Legal@MyMineralOptions.com

🟥 SECTION 10 — CALL TO ACTION

Thinking about selling your minerals? You may be able to keep a royalty for life using an ORRI.

We can help you:

  • Determine how much ORRI to retain

  • Structure ORRI properly

  • Draft or review ORRI language

  • Evaluate buyer offers

  • Model long-term ORRI income

  • Negotiate ORRI-inclusive deals

📧 ORRI Questions: Legal@MyMineralOptions.com
📧 Submit Offers: Offers@MyMineralOptions.com
📧 General Questions: Info@MyMineralOptions.com

James Small
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