There are a lot of suggestions to always get a cost free royalty clause in lease negotiations. Can anyone provide an example of this clause for use in Texas.
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I suspect you are talking about the absence of post production costs being absorbed by the Lessor (mineral owner). In this instance A cost free royalty clause would include language that would specifically state no offsets for operator, exploration, production or POST PRODUCTION costs. As a lessor you do not have a working interest in the well and should not incur expenses that suggest you do have a working interest in the well. ( My own personal opinion)
If you do not specifically state this in the lease you may very well be charged post prouction costs against your royalty. This could severly decrease the amount of payments you make annually from the well. There have been instances where the mineral owner ends up with a royalty that has been reduced to zero or a negative number (you owe the operator).
This is especially true if you are in an area where a 12.5% royalty is common. That can be eaten up by the post production costs allocated to your net acerage fairly quickly.This is an extremely important area of the lease that you will want to hold your ground on, IMO.
I usually start out with negotiating a 18% royalty and $0 post production and if need be I can accept post production costs no greater than the 5.5% spread between 18% and 12.5%. This is especially true if you are in a forced pooling area whereby the average values being accepted by the other mineral owners are lower that where you want to be. You could be forced into accepting much less than you would like to receive. Just my 2 cents….