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Royalty Clerk

Guide · 7 minute read

How Texas oil royalties are calculated

The U.S. Energy Information Administration put West Texas Intermediate crude at an average of $80.46 a barrel in July 2026. It is the benchmark that oil prices are compared with. An oil royalty line is three numbers multiplied and one subtracted. The state publishes one of them, the market publishes another, and your division order holds a third. This guide walks one real month for a real Midland County lease, so you can see where each number comes from and where to check it.

Checked against the sources listed at the end.

Watch this guide · 4 minutes

Transcript of “Why is my royalty check lower?”

Introduction

Your royalty check came in lower than last month. Before you worry, know that four things move a check, and only some are worth a call. Here is how to tell which one moved yours.

Four things move a check

A check is what the lease sold, times the price, times your share, less what comes off. So it can fall for four reasons. One: the lease sold less. Two: the price fell. Three: more came off. Four: your share changed.

One: the lease sold less

Every well declines. This is a real lease, Interstate 8-32 C in Midland County. Two years ago it sold forty thousand barrels a month. Now it sells thirteen and a half thousand. The state records what each lease sells every month, so this is the easiest cause to check.

Two: the price fell

Then the price. Oil follows the market, and the market moves every month. This is the West Texas Intermediate monthly average, from the U.S. Energy Information Administration. It rose to a hundred and two dollars in May, then fell to eighty-four in June. In July it fell another five percent. A stub price that follows it is normal.

Three: more came off

Texas takes a severance tax of four point six percent of oil and seven and a half percent of gas, so the tax rises and falls with the sale. Gas lines can also carry gathering, compression or processing fees. A fee that starts, or grows with no change of service, is worth a question.

Four: your share changed

Four: your share. If your decimal changes, every line changes with it. A unit change can do it. A new operator sets you up from its own division order, price contract and deduction schedule, and any of them can differ from the last operator's. Or your money can be held in suspense, so nothing is paid for a while.

One sample check

Here is one check, for a sample owner on that same lease. June paid $1,063.11. July paid $884.70. That is down sixteen point eight percent. The tax was the same four point six percent both months, so the deductions did not move.

What explains it, and what does not

The state says the lease sold one point six percent less oil, and the market fell five point one percent. Together that explains about six and a half percent. But the stub paid on twelve point six barrels, and the owner's share of what the lease sold was thirteen point two. That is four and a half percent less. And it priced them six eighty-six under WTI. In June, the gap was a dollar seventy-one.

Five: check the calendar

A fifth cause is timing. A month can be paid late. Oil is due sixty days after the end of the sale month, gas ninety. Two months can arrive on one check. And an adjustment for an earlier month lands on a later stub.

Ask for the detail

If the drop is bigger than the state and the market explain, ask. Please send the volume, price and deduction detail for my June and July sale months, and tell me whether my decimal or my deductions changed between them. Send it by certified mail. For questions about a payment, the payor must answer by certified mail within thirty days. If it is about a deduction the stub does not explain, the payor has sixty days.

What to do next

Split your own check's drop into volume, price, deductions and share with our free diagnostic. The sources for this video are on screen.

The sample owner is on a real Midland County lease (Interstate 8-32 C). The stubs are made up; the state volumes and WTI prices are real.

Your lease, from the state’s record

Run the math on your lease

Pick your lease and type your decimal. We use the barrels and gas the state says the lease sold and that month's average price.

Your lease

Type the lease name as your stub prints it, or the state's number.

This is what operators report to the Railroad Commission of Texas for the whole lease. It is not a record of what you were paid, and it is not legal or tax advice.

The formula

Four things set an oil royalty line. The first is the volume the lease sold in the month. The operator reports it to the Railroad Commission, and the state publishes it RRC, Production Data Query. The second is your decimal interest, your share of the whole lease, which your division order states and every stub must print §91.502(9). Multiply them and you have your barrels.

The third is the price per barrel, which the stub must show §91.502(4). The fourth is the tax. Texas taxes oil at 4.6 percent of market value, or 4.6 cents a barrel if that is more Tax Code §202.052. The stub must show the taxes paid §91.502(5).

The whole thing, in symbols

Your barrelslease barrels × decimal

Gross valueyour barrels × price

Severance taxgross × 0.046

Net, what the line paysgross − tax

Your decimal is worth a moment, because it never changes from line to line. It is the royalty fraction in your lease, times your net acres, divided by the acres in the unit:

How the decimal is built
1/4royalty fraction in your lease
5net mineral acres you own in the unit
1,280acres in the unit or tract that is pooled
0.00097656your decimal interest

Your acres in the unit

5 acres yours1,280-acre unit

The bar is drawn to scale: 5 acres out of 1,280 is 0.39 percent of the unit.

One real month, line by line

The lease is INTERSTATE 8-32 C in Midland County, Railroad Commission lease 58035. In July 2026 the state record shows 13,514 barrels of oil. The owner and decimal are a sample, the ones behind our sample audit: a 1/4 royalty on 5 net acres in a 1,280-acre unit. The price is the U.S. Energy Information Administration’s WTI monthly average for July 2026, $80.46 EIA, WTI. Read the marked-up line from top to bottom.

One oil line for July 2026, marked up

OIL · SALE MONTH 07/2026

SAMPLE OWNER

  1. Oil sold, whole lease

    State record, July 2026

    13,514 bbl

    Look it up. It is public and free.

  2. Your decimal

    1/4 × 5 ÷ 1,280

    0.00097656

    From your division order. The same on every line.

  3. Your barrels

    13,514 × 0.00097656

    13.1972 bbl

    A stub often prints 13.20.

  4. Price per barrel

    WTI, July average

    $80.46

    Your payor's price will differ. Watch the gap.

  5. Gross value

    13.1972 × $80.46

    $1,061.85

    Your share of the sale, before tax.

  6. Severance tax

    4.6% of gross

    −$48.85

    The state's rate for oil.

  7. Net, this line pays

    $1,013.00

    Rebuilt from public numbers.

INTERSTATE 8-32 C, Midland County, Railroad Commission lease 58035. The barrels are the state's figure; the owner and decimal are a sample. The price is the WTI monthly average, not any payor's price.

The sample owner’s 13,514 barrels become 13.1972 of their own. At $80.46 that is $1,061.85 gross, the 4.6 percent tax is $48.85, and the line pays $1,013.00. A stub would likely print the barrels as 13.20.

Public volume, public price, your decimal. That is the whole check.

What a price move does

Royalty rises and falls with the price in proportion, because the barrels and your decimal stay the same. Here are the same 13.1972 barrels at three prices. Only $80.46 was a real price; the other two are round numbers for comparison.

The sample owner's 13.1972 barrels at three prices, per barrel. $80.46 is the July 2026 WTI average
PriceGrossTaxNet
$60.00$791.83−$36.42$755.41
$80.46$1,061.85−$48.85$1,013.00
$100.00$1,319.72−$60.71$1,259.01

So when your check falls, the first question is whether the price fell, the barrels fell, or something else changed. The stub prints the price and the barrels, so you can tell which without asking anyone.

Why a stub will not match to the cent

Your stub and this arithmetic will not agree exactly, and most of the gap is ordinary. Six things move it:

Why a real stub differs from the arithmetic on public numbers
What differsWhy
PriceThe payor sells under its own contract. WTI is the benchmark, not the price paid. What you watch is the gap, and whether it steadies.
VolumeThe state record is what the operator reports. A purchaser computes the quantity and corrects it for gravity and temperature and for impurities, as the model division order in section 91.402(d) puts it.
TimingThe stub covers the month the oil was sold. A payment can come after the deadline, or in a later check, and adjustments can fall in a different month.
RoundingDecimals carry eight places and a stub prints fewer. The gap is cents.
TaxThe rate is 4.6 percent, but qualifying enhanced recovery projects pay 2.3 percent and a well with the two-year inactive well exemption pays nothing.
State feeThe Comptroller also charges an oil field clean-up fee of $0.00625, five-eighths of a cent, on each taxable barrel Comptroller, oil tax. On the sample owner’s barrels that is about $0.08.

Where a lease says the royalty is on “market value” or “market price” of oil sold in the field, Texas defines the term as the amount realized at the mouth of the well by the seller in an arm’s-length transaction §91.402(i). Read your own lease for the valuation clause. A division order cannot amend it.

Check your own line

  1. Find the lease. Use the Texas lease lookup and pick the sale month on your stub. The barrels sold are on the lease page.
  2. Multiply by your decimal. Your stub’s volume should land within a few percent. The lease royalty estimator does two years at once.
  3. Compare the price. The oil price check sets your stub’s price against what Texas buyers paid that month and the WTI average.
  4. Check the tax. The tax column should be 4.6 percent of the gross. The severance tax check divides it for you.

When the numbers are off

A small gap in price or volume is normal. A gap that is large, or that changes month to month, is a question. Ask for the volume and price the payor used. A written request for information about a payment, sent by certified mail, must be answered by certified mail within 30 days NRC §91.505.

The question to ask

Please send me the oil volume and the price per barrel you used for the July 2026 sales on property INTERSTATE 8-32 C, owner number 0044817, and explain any difference from the volume reported to the Railroad Commission.

If the state record shows barrels your stubs never account for, the Texas royalty audit lays every month against it. For your rights when a payment is late, see Texas royalty owner rights.

FAQ

Questions people ask

How is an oil royalty payment calculated in Texas?

Barrels of oil sold from the lease, times your decimal interest, times the price per barrel, less severance tax. For July 2026 on one Midland County lease: 13,514 barrels times a decimal of 0.00097656 is 13.1972 barrels, which at the WTI monthly average of $80.46 is $1,061.85 before tax and $1,013.00 after the 4.6 percent tax.

What is the Texas severance tax on oil?

4.6 percent of the market value of oil, or 4.6 cents a barrel if that is greater. Qualifying enhanced recovery projects pay 2.3 percent, and a well with the two-year inactive well exemption pays nothing (Tax Code section 202.052 and the Comptroller's crude oil page).

Severance tax check

Where do I find how many barrels my lease sold?

In the Railroad Commission's production data, which lists each lease's oil and gas disposition by month. Multiply the month's barrels by your decimal to get your share. The lease pages on this site show the same figures.

Look up your lease

Why is my oil price different from the WTI price?

Your payor sells the oil under its own contract, so its price will differ from the benchmark. The Energy Information Administration describes the wellhead price as the value at the mouth of the well, generally the price obtainable from a third party in an arm's-length sale. What matters is whether the gap between your price and WTI stays steady from month to month.

Oil price check

What does market value mean in my lease?

For oil or gas sold in the field where it is produced, or at a gathering point in the immediate vicinity, Texas defines market value, market price and prevailing price in the field, when a lease uses them as the basis for valuation, as the amount realized at the mouth of the well by the seller in an arm's-length transaction (Natural Resources Code section 91.402(i)).

Can I ask my operator for the volume and price it used?

Yes. A written request for information about a payment, sent by certified mail, must be answered by certified mail within 30 days (Natural Resources Code section 91.505).

Sources