Royalty interest definition
/What is a Royalty Interest?
A royalty interest is an interest retained in the output of a property when the owner of mineral rights enters into a lease agreement. A royalty interest entitles the mineral rights owner to receive a portion of the minerals produced or a portion of the gross revenue from sold production. The holder of a royalty interest is responsible for any production or severance taxes associated with the holder’s share of production. The holder of a royalty interest is usually not responsible for the exploration, development, and production costs of the leased property, so the royalty interest is considered a non-operating interest.
A royalty interest continues for the term of the underlying lease agreement. Once the agreement terminates, the royalty interest is gone.