When to Question Your Operator's Deductions (and How to Do It)

Every royalty check stub shows deductions taken by the operator before you receive your payment. Gathering fees, transportation, processing, marketing. These can add up to a significant portion of your gross revenue. Most of the time, they're legitimate costs of getting the product to market. But not always.

When Deductions Deserve a Closer Look

A deduction appears for the first time. If you've been receiving checks for years and a new deduction category suddenly shows up, find out why. Did the operator change how they allocate costs? Did they start deducting something your lease doesn't allow?

A deduction increased significantly. A gathering fee that was $50 last month and is now $200 this month deserves a question. Costs can change, but large jumps should have an explanation.

Your lease says "free of cost." Many leases contain language making the royalty "free and clear of all costs of production" or specifying that certain costs are not deductible. If your lease has this language and you're seeing deductions, there may be a problem.

Deductions are taking more than 30-40% of your gross. While there's no universal threshold, if deductions are consuming a third or more of your gross revenue, it's worth understanding whether that's normal for your area and well type.

The deduction descriptions are vague. If your stub shows "other deductions" or "miscellaneous" without a clear category, ask what those charges are for.

How to Check Your Lease

The starting point for any deduction dispute is your lease. Pull it out and look for the royalty clause. Specifically:

• Does it say your royalty is calculated "at the wellhead," "at the point of sale," or somewhere else?
• Does it include language like "free of cost," "without deduction," or "net of"?
• Does it list specific deductible costs, or is it silent on deductions?

The exact language matters. Courts interpret lease clauses narrowly, and the difference between "at the wellhead" and "at the point of sale" can determine whether certain deductions are allowed.

If your lease is unclear, a mineral rights attorney can interpret it for you.

How to Contact the Operator

When you call the operator's owner relations or division order department:

• Have your owner number and the specific well or property ready
• Reference the exact check stub (date, check number)
• Ask about the specific deduction by name and amount
• Ask them to explain the basis for the deduction and how it's calculated
• Ask whether the deduction is per your lease or per the operator's standard policy

Be polite but direct. Document the conversation: date, person you spoke with, what they said.

If You Disagree

If you believe a deduction violates your lease terms:

1. Put it in writing. Send a letter (not just a phone call) to the operator citing the specific lease language and the deductions you're contesting. Request an adjustment.
2. Keep paying attention. Sometimes operators correct the issue going forward but don't credit past overpayments. Watch subsequent stubs to see if the deduction changes.
3. Consult an attorney. If the amounts are significant and the operator won't budge, a mineral rights attorney can review your lease, send a demand letter, and advise you on your options. In some cases, you may be entitled to interest on the overcharged amounts.
4. Consider a royalty audit. For larger interests, you can hire a royalty auditor to review the operator's calculations against your lease terms. Auditors work on a contingency basis in some cases, taking a percentage of any recovered underpayments.

Track the Trends

The best defense against improper deductions is consistent tracking in MinRight. When you log each payment with the full deduction breakdown, you build a history that makes anomalies obvious. A deduction that creeps up by $10 per month over two years is easy to miss on a single check stub but impossible to miss when you chart it over time in the analytics dashboard.

For help reading your check stub and understanding what each deduction means, see our dedicated guides. And make sure your lease terms actually allow the deductions being taken.