Looking at a OGM Lease agreement recently signed by a family member calls for royalty payments of 3/16 percent "less.....taxes, production.....". Are production and transportation costs typically deducted from royalty payments percentages?
They are if you don't object. The standard lease will have just about anything they can think of to favor the lessee that an uninformed mineral owner might not object to. Your only defence is to become informed prior to executing the lease or hire professional help.
Even if the lease does not expressly provide the lessee the right to deduct post-production costs, such as compression, treating, transportation, etc., they have that right under the law. It is up to you to include a cost-free royalty clause that precludes such deductions.