Proceeds Plus Leases Explained
Miami 2025, Presentation, National Association of Land and Title Analysts
Post-production cost deductions have long been a source of dispute between royalty owners and operators in Texas.
Recent case law — most notably the Texas Supreme Court’s decision in Devon v. Sheppard — has reshaped how these costs are interpreted under certain oil and gas leases.
In short:
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Gross Proceeds leases protect royalty owners from bearing post-production costs up to the point of sale.
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Proceeds Plus leases go further, also shielding royalty owners from post-sale costs when those costs are reflected in the sales price — even if this results in a royalty value higher than the price actually received by the operator.
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The Sheppard decision confirms that custom lease language can override industry-standard interpretations, making the exact wording of your lease critical to determining cost allocation.
Understanding the nuances of lease language is essential to protecting your economic position — whether you’re drafting new agreements or evaluating existing ones.
Download our presentation from the National Association of Land and Title Analysts on Post-Production Expenses.
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