One of the key issues faced by courts in mineral-producing states is whether a lessor (the owner of the oil and gas property interest) should bear its proportionate share of post-production costs, including costs to gather, market, treat, separate and transport gas to market, as part of the royalty.
Although it has long been settled that a lessor does not bear costs of production, courts have reached divergent results as to whether costs associated with preparing and transporting the gas to market after production can be deducted from a lessor’s royalty payment.
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