Recently learned I could possibly purchase land that is producing oil. The owner stated beginning to receive bills that are being taken out of the royalities moneies. When purchasing property that is producing oil is it possible for the owner to be responsible paying for the cost of producing the oil to exceed the royalities moneies?
Thank you,
Pat
Royalty is funds received from the production of oil or natural gas, free of costs, except taxes. Some mineral leases allow for the deduction of the mineral owners proportionate share of various costs (transportation, refining, etc). The Oil, Gas & Mineral Lease would ‘spell out’ each parties responsibilities.
It is possible that the mineral owner did not execute an Oil, Gas & Mineral Lease and is participating in the well, thus making him responsible for his share of the well costs.
In either situation, the mineral owner would not have to ‘come out of pocket’ for expenses, the expenses would only be deducted from any royalties/revenue due to the owner.
I am not an attorney or a substitute for an attorney.
Chase, Independent Landman