We have a lease from 1970 for section 21 township 2 north, range 66 that allows for “free use of oil, gas, coal, wood and water from said land except for water from lessor wells for all operations hereunder and the royalty on oil and gas shall be computed after deducting any so used.” That seems to indicate that the deductions for free use of oil and gas would be taken out off the top of gross production. In other words the amount of gross production shown on pay stubs would already reflect that deducted amount. Is this correct?
Another thing I've noticed is that the price paid for oil is generally about $5 under the price of oil on any given month. The lease doesn't specifically state that the royalty owner will be paid 1/8 of the market price but there's an indication that that is implicit when it allows the leasee to “purchase any royalty oil in its possession at the prevailing market price for the field where produced on on the date purchased.” Have other people noticed a difference in the amount being paid and the market price, is this typical?