A lump-sum cash payment can be used more effectively than small monthly royalty checks, and can be used to pay off large bills all at once, or used to fund a college education or retirement account.
Diversification
“Don’t put all your eggs in one basket” is a saying you have probably heard. If the majority of your current income is derived from mineral rights you are much more vulnerable to the price swings inherent with oil and gas that could drastically affect your income. Selling some or all of your interest would reduce that risk and allow you to put the money from the sale to work in other, more stable investments.
Paperwork Reduction
Some owners would rather spend their free time doing something other than managing mineral interests that may not be making them much money. Eliminating the paperwork associated with mineral ownership can also significantly simplify your tax returns each year.
Some mineral owners in good areas are able to lease their mineral rights many times over the years without a well ever being drilled, and some receive quite a nice bonus every few years from doing so. Eventually however, they too will see a decline in lease bonus rates due to declining opportunities for production in their area. New drilling technologies do occasionally bring an old area “back to life” but once the oil and gas is gone, it’s really gone. This is why mineral rights are classified as “depleting assets.”
“Fractionalization”
As mineral rights are passed from one generation to the next they are often divided into such small amounts that their economic value to each succeeding generation diminishes exponentially. Keeping track of the minerals at that point can become more of a headache than they are worth to the heirs. This is often referred to as the “fractionalization problem” and is one reason many owners end up selling their mineral rights while they are still alive rather than letting them be split into smaller and smaller pieces with each passing generation.