A few weeks ago the Pittsburgh Post-Gazette ran an article about a relatively new trend happening in shale country: landowners reselling their already leased royalty rights (see the PPG story Pennsylvania landowners can get cash on spot for mineral rights). It’s sometimes referred to as “flipping” their royalty rights. In essence, it works like when a person wins the lottery but the payments are stretched over a period of years–like 15-20 years–but the winner would prefer to have their money now. There are companies that will pay the winner a discounted price for the right to receive the future payments. Maybe the winner would have ended up getting $1 million when all payments are made, but the company is willing to pay them, say, $600,000 right now. So the winner takes the money now and signs over the future payments to the company. The winner gets half or more now, the company pockets a nifty sum but has to wait to get it.
Something similar is happening with potential (not even actual) royalties from shale drilling in the Marcellus–except the stakes are higher, and the risk much greater…
