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When must a company pay royalties on oil and gas proceeds?

On Behalf of | Aug 17, 2022 | Uncategorized

If you own land used for oil or gas mining, you likely have an agreement for payment of royalties. These are part of the earnings made on selling the oil and gas obtained from your land.

While your contract may have various details about your agreement, Texas law also stipulates how and when you should receive your royalty payments.

First payment

The company has 120 days from the end of the month of the sale of the first products taken from your land. The initial payment gives them time for all the inner working details they need to get payments set up for regular payout to you.

Additional payments

After that first payment, the law requires the company to pay you according to the contract or lease you have in place. This must be regular and timely. If the contract does not state payment times or otherwise is not valid, then payments must occur at least 60 days after the end of the month in which the product sells for oil and 90 days for gas.

Withholding

The law does allow withholding of payments if there is a title dispute of some kind and ownership is not clear. You can usually avoid this by not selling your land without alerting the company to what is happening and including the oil or gas lease in the sales process. Also, royalties are subject to seizure to pay child support obligations.

It is important for you to completely read and understand your lease or contract with the oil or gas company. This will often guide when you will receive the payments for royalties. Make sure you are in agreement before signing the document.