What is an expense free royalty? | The Law Offices of Gregory D. Jordan

What is an expense free royalty?

An expense free royalty is a royalty that is not burdened by post-production costs such as transportation, dehydration, compression, treating and marketing costs. When negotiating an oil and gas lease, the mineral owner will usually want to obtain an expense free royalty. Unfortunately, court decisions in Texas cases such as Heritage Resources, Inc. v. National Bank and Judice v Mewbourne Oil Co., have made it difficult to obtain a truly expense free royalty unless the royalty provision is very carefully drafted. It is highly recommended that such provisions be drafted by a knowledgeable oil and gas leasing attorney.

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