Overriding Royalty Interest Law and Legal Definition
The term "overriding royalty interests" means fractional, undivided interests or rights of participation in the oil or gas, or in the proceeds from the sale of the oil or gas, produced from a specified tract or tracts, which are limited in duration to the terms of an existing lease and which are not subject to any portion of the expense of development, operation or maintenance.
A royalty interest, in addition to the basic royalty, created out of the working interest; it is, therefore, limited in its duration to the life of the lease under which it is created. An overriding royalty is the right to receive revenues, in addition to the basic royalty, from the production of oil and gas from a well without paying the drilling or monthly operating expenses from the well. Overriding royalty interests are not connected to an ownership of minerals under the ground. Rather, it stems from ownership of a portion of generated revenues from oil and gas. Owners of overriding royalty own only proceeds from the production of minerals and not the minerals under the ground. An overriding royalty interest expires once the lease has expired and production has stopped, whereas, minerals and royalties owners maintain their ownership after production stops.