Puerto Rico Assignment of Overriding Royalty Interest (ORRIS) is a contractual agreement between a party who owns the mineral rights to a property and another party who wishes to receive a portion of the revenue generated from oil production. This type of ORRIS is particularly unique in that it becomes effective only when the oil production reaches a certain threshold called "payout," and the payout amount is determined based on the volume of oil produced. In Puerto Rico, there are two main types of Assignment of Overriding Royalty Interest to Become Effective At Payout, With Payout Based on Volume of Oil Produced: 1. Flat Percentage ORRIS: Under this type of arrangement, the holder of the mineral rights assigns a fixed percentage of the revenue generated from the oil production to another party. Once the oil production reaches the designated payout threshold, the assigned percentage of revenue kicks in, ensuring a steady stream of income for the recipient based on the volume of oil produced. 2. Sliding Scale ORRIS: In a sliding scale ORRIS, the percentage of revenue assigned to the recipient varies based on the volume of oil produced. Typically, a lower percentage is assigned for smaller production volumes, while a higher percentage is assigned as the oil production increases. Once the payout is reached, the sliding scale ORRIS will be activated, guaranteeing a higher share of revenue to the recipient. Both types of Puerto Rico Assignment of Overriding Royalty Interest to Become Effective At Payout, With Payout Based on Volume of Oil Produced provide an opportunity for the party holding the mineral rights to share the risks and potential rewards of oil production with another party. The agreement ensures that the recipient only benefits when the oil production is profitable enough to reach the payout threshold, which helps to align the interests of both parties involved. It is essential for parties considering such an arrangement to carefully negotiate the terms and percentages to ensure a fair distribution of revenue once the payout is achieved. Additionally, regular monitoring and reporting of oil production volumes are necessary to accurately calculate and distribute the assigned royalties to the recipient. Overall, this type of Puerto Rico Assignment of Overriding Royalty Interest to Become Effective At Payout, With Payout Based on Volume of Oil Produced provides an avenue for parties to collaborate and share the financial risks and rewards associated with oil production, fostering an environment of mutual benefit and cooperation.