The last few years have seen a boom in the oil and gas exploration business in the U.S., driven by new technologies that have allowed exploitation of “unconventional” resources for gas and oil. These resources are often called “resource” plays, because the oil and gas is being produced from shale…
Last week, in Post-Production Costs in Texas-Part II, I discussed the Texas Supreme Court’s decision in Heritage Resources v. NationsBank regarding the deductibility of post-production costs from lessor’s royalties under an oil and gas lease. Justice Priscilla Owen (now a judge on the U.S. Court of Appeals for the Fifth…
Last week I introduced the term “post-production costs” and attempted to explain what those costs are and how oil companies account for such costs in calculating royalties. I said that Texas courts have construed the standard gas royalty clause to allow oil companies to deduct post-production costs from royalties. The…
Mineral owners in Texas have learned that their leases should provide for a “cost-free” royalty. By this, they generally understand that the lease should prohibit the lessee from deducting any costs from their royalty. Herein, then, are some ruminations about what lawyers and oil companies refer to as “post-production costs.”…