From capital risk to environmental risks, the oil and gas business is – viewed as a whole – a risky business. Fortunately for royalty owners, risks, liabilities and expenses are borne solely by the working interest owners, i.e. the companies and individuals putting up the money to drill and maintain oil and natural gas wells.
In addition to being immune from up-front exploration and drilling costs, royalty owners are also not subject to ongoing capital calls or operator assessments. Other than potential administrative costs associated with managing the asset portfolio, royalty owners contribute nothing outside the initial investment.