Is this how deductions are handled in Oklahoma? This is the response from an Operator who is withholding deductions on gas royalty payments when their deductions were challenged.

"It is understood that unless specifically stating that we cannot deduct, then deductions are allowed."

Do they not have to have it specifically stated that deductions can be allowed before they can deduct them?

Read the lease. If your lawyer wrote it correctly, they cannot take deductions. However, it seems as if they do take deductions despite the lease verbiage. Then, you would have to sue them, and the amount recovered probably would not cover legal expenses, and it seems as if the courts favor the oil companies.

If you signed the oil company's contract, I suspect you are out of luck.

Since individual contracts all seem to be different, it is difficult to form a class action law suit.

Probably the best answer is to never, ever do business with that company again.

There was no lease signing. This is interest I acquired now that new wells came online they have deductions. After questioning the deductions and asking them specifically "by what means are you deducting deductions" their reply was if it is not specifically stated in the lease no deductions then we assume we can deduct. These are leases from 1973 and 1977, I had no part in executing them. My question was if it is not spelled out in the lease then how can they do it? It doesn't say in my lease they can deduct the cost to talk to me about this, but what's to stop them from saying that then charging me?

Post production costs, such as transportation, compression, marketing and many more, are to borne by the royalty owner in their respective share of such production. UNLESS, the lease specifically prohibits those costs being accounted against the royalty owner in the lease itself.

Royalty is considered cost free up to the wellbore. After that, royalty is considered to bear its share of costs, unless the lease provides differently.

From 1970 era leases, it is almost certain that there was no clause in the lease prohibiting the taking of post production costs.


Buddy Cotten

Thank you both for clarifying that. Appreciate it.

It is important for families leasing and those buying mineral rights to preserve the legal documents.

Jay, Mr. Cotten and Mr. Gill can give you much better information than I can. All of our minerals are in East Texas, but I can tell you since Samson and Sabine have filed bankruptcy, their expenses have increased to 40-50%+ each. Most of the other operators are still in the 15-20% range in our area.