Royalty Check Deductions

If a lease states that oil produced is free of cost, is it permissible in Wyoming for the producer to deduct costs such as Transportation, Hauling, Haul Loss/Gain, Facility, Gathering?

Is it permissible for the operator to deduct so much from gas that it results in a negative balance for a component transaction? Should we have to pay the operator to take our gas, or at best leave us with about 30% of the gross?

The issue of cost free royalties is actually very complicated and what seems like a “cost free” royalty clause in a lease to a lay person, is often not worth the paper it is written on in a court of law. The operators know this and are often happy to agree to “cost free” lease provisions that they know don’t actually mean anything and allow them to deduct costs.

It depends on the language of the lease - the whole royalty provision, not just a few words - and the state where the minerals are located. Consider contacting an attorney to review your lease and royalty stubs. Many active on this site may be willing to provide a free initial consultation.

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