Texas Mineral Rights Royalties: What You Should Be Getting Paid (and How to Check)

If you own mineral rights in Texas and those rights are covered by an oil and gas lease, you should be receiving royalty payments whenever oil or gas is produced from wells on your property. But many mineral rights owners in Texas receive far less than they should — or nothing at all — because they don’t understand how royalties work or how to verify their payments are correct.

How Texas Mineral Rights Royalties Work

When an oil and gas company leases your mineral rights, the lease agreement sets out a royalty rate — typically expressed as a fraction such as 1/8 (12.5%), 3/16 (18.75%), 1/5 (20%), or 1/4 (25%). This fraction represents the portion of oil or gas production value that flows to you as the mineral rights owner, before operating costs are deducted.

Hypothetical arithmetic only: 100 barrels per day × $75 per barrel × a 20% lease royalty equals $1,500 per day before ownership and unit-allocation adjustments, taxes and applicable deductions. This would not be your payment unless your interest entitled you to the entire assumed royalty share. Actual payments depend on the interest, lease, allocation, volumes, prices and adjustments; this is not a production or income forecast.

What Is a Good Royalty Rate for Texas Mineral Rights?

Royalty fractions vary by lease and negotiating circumstances. The examples below are not a statement of current market terms or a guarantee that a particular rate is available.

• 1/8 (12.5%): The historical “standard” rate, but now considered low. If you have a lease with this rate and it’s up for renewal, you should negotiate for more.
• 3/16 (18.75%): A common middle-ground rate in many Texas markets.
• 1/5 (20%) or 1/4 (25%): Rates achievable in high-demand areas, particularly the Permian Basin, where operators compete aggressively for acreage.
• Above 25%: Possible in the most prized acreage positions, though less common.

Before renewing or changing a lease, have a qualified independent professional review all its terms rather than judging it by royalty percentage alone.

Common Problems With Royalty Payments

Royalty underpayment is one of the most widespread issues in the Texas oil and gas industry. Studies have found that a significant percentage of royalty owners receive incorrect payments. Here are the most common issues to watch for:

1. Improper Post-Production Cost Deductions

Texas law and most lease agreements limit the deductions operators can take from royalty payments. “Post-production costs” include costs for gathering, transportation, compression, processing, and marketing the gas or oil after it leaves the wellhead. Depending on your lease language, some or all of these costs may not be deductible from your royalty. Many operators deduct costs they shouldn’t — review your lease carefully or consult an attorney if you see unusual deductions on your royalty statements.

2. Errors in Production Allocation

When a well covers multiple leases or tracts, production must be allocated among the mineral rights owners based on their percentage interest. Errors in these calculations — sometimes significant — can result in underpayment to some owners. If you own a fractional mineral interest, make sure the decimal interest on your division order matches what your deed says you own.

3. Late Payments

Texas law (Texas Natural Resources Code §91.402) requires operators to begin paying royalties within 120 days after the end of the month of first sale from a well. After that, payments are due within 60 days after the end of the month for oil, and 90 days for gas. If payments are late without a lawful reason (such as a bona fide title dispute), §91.403 entitles you to interest at two percentage points above the New York Federal Reserve discount rate — unless your lease specifies a different rate.

4. Failure to Pay on Bonus and Delay Rentals

Beyond royalties, your lease should include an upfront bonus payment and, in some leases, delay rental payments during the primary term before production begins. Make sure all lease payments are received as agreed.

How to Check If Your Royalty Payments Are Correct

1. Request Your Division Order

A division order is a document the operator sends you that specifies the exact decimal interest you’re being paid on. This decimal should be consistent with your deed. For example, if you own 50 net mineral acres in a 640-acre unit with a 20% royalty rate, your decimal interest should be: (50/640) × 0.20 = 0.015625. Ask for a copy if you haven’t received one.

2. Review Your Royalty Statements

Royalty statements should show the well name, production volumes, price received, any deductions, and the resulting payment to you. Compare the price received to public market prices for that month — large discrepancies can indicate improper pricing or marketing arrangements.

3. Consult a Royalty Audit Specialist

If you receive significant royalty income, a professional royalty audit can identify underpayments. Many audit firms work on a contingency basis — they only get paid if they find and recover underpayments for you.

How Royalty Income Affects the Value of Your Mineral Rights

Production and royalty history can inform a property-specific valuation, together with decline expectations, development prospects, lease terms and other evidence. This article does not establish a reliable sale-price multiple.

A monthly check alone does not establish what a buyer would offer or the market value of the rights.

This website does not calculate a current value or provide an appraisal. A qualified independent professional can assess the specific interest using ownership, lease, production and current market evidence. You may use the information tool to organize your county, acreage and lease details.

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