(FORTUNE Magazine) -- For investors seeking a sweet 13% dividend or an easy way to play rising oil prices, the BP Prudhoe Bay Royalty Trust seemed like a great bet. (The trust distributes royalties on oil produced from Prudhoe Bay and has no other income stream.)

Then, of course, BP closed part of its Prudhoe Bay oilfield. So while the news stoked supply fears and crude prices briefly topped $76 a barrel, BPT shares slid 13%.

More from Fortune Will Mmmhops be a hit? NBA confirms L.A. Clippers sale to ex-Microsoft CEO Steve Ballmer FBI and SEC probe into Carl Icahn and golfer Phil Mickelson FORTUNE 500 Current Issue Subscribe to Fortune

Oil in depth What went wrong at Prudhoe Bay In his first interview since early in BP's Prudhoe Bay pipeline crisis, new BP America president and chairman Robert Malone speaks with Fortune's Abrahm Lustgarten. (more) BP should stick to oil Forget the good guy image. BP's recent history of mismanagement tells us it needs to focus on running its oil business. (more) Oil's easy money Fortune's Andy Serwer drills down to find out how one veteran of the crude biz plans to reap his next windfall. (more)

Long before the shutdown, however, declining production was clouding BPT's (Charts) future. The trust receives 16.42% of the net proceeds from the first 90,000 barrels per day from BP Alaska's interest in the area. But net output, which peaked at 550,000 barrels per day in 1991, had slid to 99,000 by May of this year.

"Reserves are being produced out," explains Manuj Nikhanj, an analyst with Ross Smith Energy Group, an independent research firm. "We see production declining to below 90,000 barrels a day in 2008." (BPT asserts production won't dip that low until 2012.)

A state tax hike due this year will further lower trust distributions. "The shutdown is just camouflaging the real problems," says Nikhanj, who issued a negative report on BPT two months before the shutdown.

Adds A.G. Edwards analyst Michael Heim, who issued his own sell rating July 24: "It's simply a matter of declining production and rising costs."

Royalty trusts can be risky. They exist only to distribute assets, typically in the form of a dividend, to unit holders. They are pure, unhedged bets on both a specific commodity and a specific deposit, offering the best (or worst) of both worlds.

A drop in commodity price or a problem with supply means danger. But investors seeking yield and a play on oil and natural-gas prices might consider two alternatives, Sabine Royalty Trust (Charts) and Permian Basin Royalty Trust (Charts). Both offer juicy yields - 9% and 9.7%, respectively - and both have properties (many in Texas) with production expected to hold steady for more than 40 years.

In mid-August, ConocoPhillips announced it will sell 8.4 million Permian shares, which it acquired as part of its purchase of Burlington Resources. Any resulting price weakness could offer the chance to buy at a discount.

BP Alaska production cut some more