royalty clause in Texas

2015Ed. 632 , 67 S. Ct. 87 (1946)(decided the same day, holding that royalty on processed gas is 1/8th of the sale proceeds less a credit for transportation, separation, and sales costs under a royalty clause that called for ″1/8th of net proceeds derived from the sale of the gas at the mouth of the well″); Holbein v. Austral Oil Co., Inc., 609 F.2d 206, 209 (5th Cir. 1980)(dehydration costs deductible from royalty under clause basing royalty on amount realized from the sale of gas).

2015Id. at 323. on processed gas is 1/8 th of the sale proceeds less a credit for transportation, separation, and sales We have recognized that for occupation tax costs under a royalty clause that called for “ 1/8 th purposes, the market value of processed gas is of net proceeds derived from the sale of the gas at measured as to all ownership interests, including the mouth of the well”); Holbein v. Austral Oil Co., royalty interests, by the total proceeds of the sale of Inc., 609 F.2d 206, 209 (5th Cir.1980) (dehydration the component parts of the gas after processing, costs deductible from royalt

2015We disagreed, holding that market value is determined at the point in time when the gas is actually produced and delivered. 613 S.W.2d at 245 .

2015We dis- 366 (1936), we concluded that a lessor suing for agreed, holding that market value is determined at underpayment of royalties based on a clause calling the point in time when the gas is actually produced for payment of “proceeds” had stated a cause of ac- and delivered. 613 S.W.2d at 245 .

2024In Chesapeake Exploration, L.L.C. v. Hyder, 483 S.W.3d 870 (Tex. 2016), the supreme court addressed language in a royalty clause that is similar to the language in the royalty clause in this case.

2024In Hyder, the supreme court reviewed a royalty clause that provided for “‘a perpetual, cost-free (except only its portion of production taxes) overriding royalty of five percent (5.0%) of gross production obtained’ from directional wells drilled on the lease but bottomed on nearby land.” Hyder, 483 S.W.3d at 872 .

2021Oil & Gas Co. LP v. Tex. Crude Energy, LLC, 573 S.W.3d 198, 203 (Tex. 2018). 43 Chesapeake Expl., LLC v. Hyder, 483 S.W.3d 870, 873 (Tex. 2016) (applying a royalty clause based on the price “actually receive[d] by Lessee”). 44 Burlington Res., 573 S.W.3d at 204 (“This Court and other courts have recognized that an agreement to value a royalty interest based on the ‘amount realized,’ or similar language, can grant the royalty holder the right to a percentage of the sale proceeds with no adjustment for post-production costs.”); see Warren v. Chesapeake Expl., L.L.C., 759 F.3d 413, 417 (5th Cir.

2019As a federal court interpreting a royalty clause also noted, one method for a lessee to shift the burden of paying post-production costs is to say “in the addendum that the lessor was entitled to 22.5% of the actual proceeds of the sale, regardless of the location of the sale.” Warren v. Chesapeake Expl., L.L.C., 759 F.3d 413, 418 (5th Cir. 2014).

2006See id. at 744 (affirming on interlocutory appeal district court’s order certifying Class).

2005See id. at 744 (affirming on interlocutory appeal district court’s order certifying Class).

2003See id.

2003See id.

1996In Bruni I, we answered negatively the question of “whether a standard royalty clause applies to settlement of a take-or-pay provision.” Killam Oil Co. v. Bruni, 806 S.W.2d 264, 266-68 (Tex.App.-San Antonio 1991, writ denied).

1996In Bruni I, we answered negatively the question of "whether a standard royalty clause applies to settlement of a take-or-pay provision." Killam Oil Co. v. Bruni, 806 S.W.2d 264, 266-68 (Tex.App.—San Antonio 1991, writ denied).

2025Thus, when the Supreme Court of Texas interpreted a wellhead-market-value lease in Heritage, a plurality concluded that the lease’s version of the Add-On Provision was “surplusage.” Heritage, 939 S.W.2d at 130–31 (Owen, J.) (plurality op. on reh’g) (explaining that, because “‘market value at the well’ [wa]s the benchmark for valuing the gas, [the] phrase prohibiting the deduction of post-production costs from that value d[id] not change the meaning of the royalty clause” and was “surplusage”).

2015Page 8 939 S.W.2d 118 , 39 Tex. Sup. Ct. J. 537 (Cite as: 939 S.W.2d 118 ) determining market value at the well and multiply- argument that the transportation costs Heritage de- ing it by the fraction specified in the royalty clause ducted were reasonable. ( 1/4 or 1/5 ).

1997See also Martin v. Glass, 571 F.Supp. 1406, 1411-15 (N.D.Tex.1983), aff'd, 736 F.2d 1524 (5th Cir.1984) (post-production compression charges held deductible under a royalty clause based on net proceeds at the well).

1997See also Martin v. Glass, 571 F.Supp. 1406, 1411-15 (N.D.Tex.1983), aff'd, 736 F.2d 1524 (5th Cir.1984) (post-production compression charges held deductible under a royalty clause based on net proceeds at the well).

2015Tex. 1983), aff’d, 736 F.2d 1524 (5th Cir. 1984) (post-production compression charges held deductible under a royalty clause based on net proceeds at the well).

2015The case of Pan 1411–15 (N.D.Tex.1983), aff'd, 736 F.2d 1524 (5th American Petroleum Corp. v. Southland Royalty Cir.1984) (post-production compression charges Co., 396 S.W.2d 519 , 524–25 (Tex.Civ.App.—El held deductible under a royalty clause based on net Paso 1965, writ dism'd w.o.j.), relied on Miller and proceeds at the well).

2021Rev. 516 , 524-25 (2017). 11 netting postproduction costs back to the wellhead. 39 The formulation of the royalty provision in the Printed Lease reflects the general rule that the lessor must share postproduction costs. “‘Proceeds’ or ‘amount realized’ clauses require measurement of the royalty based on the amount the lessee in fact receives under its sales contract for the gas,” regardless of whether it is more or less than market value. 40 In common parlance, the “proceeds” of a sales transaction may be either the gross amount received or the net amount remaining after deductions. 41 Whether

2021Oil & Gas Co. LP v. Tex. Crude Energy, LLC, 573 S.W.3d 198, 203 (Tex. 2018). 43 Chesapeake Expl., LLC v. Hyder, 483 S.W.3d 870, 873 (Tex. 2016) (applying a royalty clause based on the price “actually receive[d] by Lessee”). 44 Burlington Res., 573 S.W.3d at 204 (“This Court and other courts have recognized that an agreement to value a royalty interest based on the ‘amount realized,’ or similar language, can grant the royalty holder the right to a percentage of the sale proceeds with no adjustment for post-production costs.”); see Warren v. Chesapeake Expl., L.L.C., 759 F.3d 413, 417 (5th Cir.

2015Ed. 632 , 67 S. Ct. 87 (1946)(decided the same day, holding that royalty on processed gas is 1/8th of the sale proceeds less a credit for transportation, separation, and sales costs under a royalty clause that called for ″1/8th of net proceeds derived from the sale of the gas at the mouth of the well″); Holbein v. Austral Oil Co., Inc., 609 F.2d 206, 209 (5th Cir. 1980)(dehydration costs deductible from royalty under clause basing royalty on amount realized from the sale of gas).

1997See also Phillips Petroleum Co. v. Johnson, 155 F.2d 185, 189 (5th Cir.), cert. denied, 329 U.S. 730 , 67 S.Ct. 87 , 91 L.Ed. 632 (1946) (decided the same day, holding that royalty on processed gas is "1/8th of the sale proceeds less a credit for transportation, separation, and sales costs under a royalty clause that called for "1/8th of net proceeds derived from the sale of the gas at the mouth of the well"); Holbein v. Austral Oil Co., Inc., 609 F.2d 206, 209 (5th Cir.1980) (dehydration costs deductible from royalty under clause basing royalty on amount realized from the sale of gas).

1928Ed. 566 , and Hager v. Stakes, 116 Tex. 453 , 294 S. W. 835 , do affirmatively decide that the extent of the estate granted in such instruments is the oil and gas, less the exception contained in the royalty clause, which exception is real estate and remains the property of the lessor.

1928Ed. 566 , and Hager v. Stakes, 116 Tex. 453 , 294 S. W. 835 , do affirmatively decide that the extent of the estate granted in such instruments is the oil and gas, less the exception contained in the royalty clause, which exception is real estate and remains the property of the lessor.

1991The pertinent provision of the royalty clause in the lease involved here provides: The royalties to be paid by lessee are: ... (b) on gas, including casinghead gas and all gaseous substances, produced from said land and sold or used off the premises or in the manufacture of gasoline or other product therefrom, the market value at the mouth of the well of one-eighth of the gas so sold or used provided that on gas sold at the wells the royalty shall be one-eighth of the amount realized from such; ... (emphasis added). *267 In Garcia v. King, 139 Tex. 578 , 164 S.W.2d 509 (1942), the court held t

1991The pertinent provision of the royalty clause in the lease involved here provides: The royalties to be paid by lessee are: ... (b) on gas, including casinghead gas and all gaseous substances, produced from said land and sold or used off the premises or in the manufacture of gasoline or other product therefrom, the market value at the mouth of the well of one-eighth of the gas so sold or used provided that on gas sold at the wells the royalty shall be one-eighth of the amount realized from such; ... (emphasis added). *267 In Garcia v. King, 139 Tex. 578 , 164 S.W.2d 509 (1942), the court held t

2025LLC v. Bradshaw, 457 S.W.3d 70, 75 (Tex. 2015), which may be described either as an interest in minerals that “may be produced” or as an interest in the same minerals “in and under the land” at the time of the deed.

2025Even though the “and” variation often appears in mineral deeds, the disjunctive “or” has appeared in royalty deeds containing express royalty language. 6 This makes grammatical sense, as a royalty interest is an “interest in 6 See, e.g., Myers-Woodward, LLC v. Underground Services Markham, LLC, 716 S.W.3d 461 , 472 (Tex. 2025) (reservation of “royalty of 1/8 of . . . minerals in, on, or under, or that may be produced” in a 1947 deed reservation, noting “the royalty clause at issue does not appear to be particularly unusual”); Hysaw, 483 S.W.3d at 5 (reservation of “minerals in or under or that

2025Even though the “and” variation often appears in mineral deeds, the disjunctive “or” has appeared in royalty deeds containing express royalty language. 6 This makes grammatical sense, as a royalty interest is an “interest in 6 See, e.g., Myers-Woodward, LLC v. Underground Services Markham, LLC, 716 S.W.3d 461 , 472 (Tex. 2025) (reservation of “royalty of 1/8 of . . . minerals in, on, or under, or that may be produced” in a 1947 deed reservation, noting “the royalty clause at issue does not appear to be particularly unusual”); Hysaw, 483 S.W.3d at 5 (reservation of “minerals in or under or that

2021Rev. 516 , 524-25 (2017). 11 netting postproduction costs back to the wellhead. 39 The formulation of the royalty provision in the Printed Lease reflects the general rule that the lessor must share postproduction costs. “‘Proceeds’ or ‘amount realized’ clauses require measurement of the royalty based on the amount the lessee in fact receives under its sales contract for the gas,” regardless of whether it is more or less than market value. 40 In common parlance, the “proceeds” of a sales transaction may be either the gross amount received or the net amount remaining after deductions. 41 Whether

2021Rev. 516 , 524-25 (2017). 11 netting postproduction costs back to the wellhead. 39 The formulation of the royalty provision in the Printed Lease reflects the general rule that the lessor must share postproduction costs. “‘Proceeds’ or ‘amount realized’ clauses require measurement of the royalty based on the amount the lessee in fact receives under its sales contract for the gas,” regardless of whether it is more or less than market value. 40 In common parlance, the “proceeds” of a sales transaction may be either the gross amount received or the net amount remaining after deductions. 41 Whether

2021Oil & Gas Co. LP v. Tex. Crude Energy, LLC, 573 S.W.3d 198, 203 (Tex. 2018). 43 Chesapeake Expl., LLC v. Hyder, 483 S.W.3d 870, 873 (Tex. 2016) (applying a royalty clause based on the price “actually receive[d] by Lessee”). 44 Burlington Res., 573 S.W.3d at 204 (“This Court and other courts have recognized that an agreement to value a royalty interest based on the ‘amount realized,’ or similar language, can grant the royalty holder the right to a percentage of the sale proceeds with no adjustment for post-production costs.”); see Warren v. Chesapeake Expl., L.L.C., 759 F.3d 413, 417 (5th Cir.

2021Oil & Gas Co. LP v. Tex. Crude Energy, LLC, 573 S.W.3d 198, 203 (Tex. 2018). 43 Chesapeake Expl., LLC v. Hyder, 483 S.W.3d 870, 873 (Tex. 2016) (applying a royalty clause based on the price “actually receive[d] by Lessee”). 44 Burlington Res., 573 S.W.3d at 204 (“This Court and other courts have recognized that an agreement to value a royalty interest based on the ‘amount realized,’ or similar language, can grant the royalty holder the right to a percentage of the sale proceeds with no adjustment for post-production costs.”); see Warren v. Chesapeake Expl., L.L.C., 759 F.3d 413, 417 (5th Cir.

2017McMahon v. Christmann, 157 Tex. 403 , 303 S.W.2d 341, 346 (1957). 80 .

2017McMahon v. Christmann, 157 Tex. 403 , 303 S.W.2d 341, 346 (1957). 80 .