Alabama has the highest headline production tax rate in the country and withholds income tax from a nonresident's sale at closing. It is also gentler on a nonconsenting owner than almost any other state.
This is the whole guide, on one page, free, with nothing gated. It covers what you own, the Alabama law that decides what lands in your bank account, whether your minerals can be taken from you, what happens if a well is drilled and you are not leased, what you owe when you sell, and the questions worth asking any buyer including us.
Almost every confusing thing in oil and gas comes from the fact that the mineral estate is not one thing. It is a bundle of five rights that can be split apart and sold separately:
A mineral interest is all five. A non-participating royalty interest is only the fifth, with no say in leasing and no share of bonus. An overriding royalty interest is carved out of a particular lease and dies when that lease dies. A working interest takes revenue net of costs and, unlike all of the above, can lose you money.
Which one you hold changes the value, the tax treatment, and who has to sign what. Start here: NPRIs, overriding royalties, and the glossary.
**Alabama has not decided this, and we would rather say so than pick a side.** There is no reported Alabama appellate decision squarely allocating post production costs, and Alabama does not appear in the standard state by state alignments. Your lease language controls, and it controls more completely here than in a state with settled defaults. If you are negotiating a new Alabama lease, insist on an express no deductions clause.
Your first move if the deductions look wrong is a written demand by certified mail, keeping the receipt, because the certification is what starts the clock. Our free letter templates have the wording and the statement decoder explains every line on the stub.
Alabama has no royalty payment timing statute of the kind most producing states have. Your lease governs.
| Minimum payment rule | Not set by statute. |
| Time limit to sue over an underpayment | Governed by general contract limitations |
A stopped check very often is not a stopped well. The usual causes are a balance under the minimum threshold, a title change putting the interest in suspense, an unprobated death in the chain, an address the payor could not deliver to, or a change of payor after an acquisition. That money does not disappear; it sits in suspense and eventually goes to state unclaimed property. See unclaimed royalties.
We could not locate an Alabama dormant mineral act and Alabama is absent from the survey tables. **Ala. Code § 24-9-8(e)** expressly excepts severed mineral, mining, oil and gas rights from a Land Bank extinguishment mechanism, which is consistent with there being none, though it is not proof. Confirm with an Alabama title attorney if your interest has sat unused for decades.
Yes, called **forced integration**, under **Ala. Code § 9-17-13** and Board Rule 400-7-2-.01. The election runs **30 days after commencement of actual drilling operations, or before total depth, whichever is earlier**, which means it runs off the spud rather than off the order. The risk compensation fee is **150 percent**, and an unleased owner keeps a **3/16ths part**, or the actual landowner royalty if less, free of development costs, operating costs and any risk fee lien. If the operator cannot locate you in good faith, the risk fee is not imposed.
The reason any of this exists is the rule of capture: a well on the tract next to yours can legally drain oil and gas from under your land, and you cannot sue anyone for it. Pooling is what converts being drained into having a share. The expensive mistake is almost never the pooling itself. It is missing the election deadline, which turns a real choice into a default nobody picked.
Severance tax. Two stacked taxes. The **privilege tax** defaults to **8 percent**, stepping down to 6 percent for wells permitted July 1988 or later and 4 percent for oil wells at or under 25 bbl/day and gas wells at or under 200 Mcf/day. On top, a **production tax** of 2 percent of value at the point of production.
When you sell. **Ala. Code § 40-18-86 requires withholding at closing** on a nonresident sale of real property: **3 percent** of the purchase price where the seller is an individual and **4 percent** where the seller is an entity, or 3 or 4 percent of the **gain** if the seller furnishes Form NR-AF2. Alabama's income tax is graduated with a top rate of 5.00 percent, and some jurisdictions add local income taxes.
See taxes when you sell mineral rights, and if you inherited the interest, understand the stepped-up basis before you sell anything: your basis is generally the value at the date of death, not what your grandparents paid, which frequently means far less taxable gain than owners expect.
Unusually convenient: the **Judge of Probate holds both the probate records and the land records**, so a mineral chain and the estate file are in one building. Alabama has no dower and no state estate or inheritance tax.
The single most common thing we see is an interest still sitting in the name of someone who died twenty or forty years ago. It is fixable, it is cheaper to fix than to leave, and we pay for the curative work as part of a purchase. See inherited mineral rights, selling before probate is done, and transferring inherited minerals.
State Oil and Gas Board of Alabama via the Geological Survey. Two quirks: Alabama keys records on **permit number, not API number**, and the production lookup is batch oriented rather than searchable by owner. Land records are with the Judge of Probate in each of 67 counties.
Our well records by state page links every state's free public search, and our operator directory covers more than 38,000 operators with contact information refreshed weekly.
Producing royalties are priced off cash flow and decline. Non-producing minerals are priced off location and activity. Almost every offer you receive is built the same way: take your last twelve months of royalty income and apply a multiple.
That method has one predictable failure, and it is worth understanding because it is where most owners lose money. It assigns a value of zero to anything that has not happened yet. A permit next door. An undrilled bench under your section. A refrac on an old wellbore. A unit being formed. None of that is in last year's income, so none of it is in the offer.
Ask any buyer, including us, to show you their remaining location count and the reasoning behind it. If they will not break it out, they are pricing your check rather than your minerals. See how mineral rights are valued.
You are welcome to use every one of these on us. That is the point of publishing them.
A check stub, an old deed, a division order, a pooling order, or just the county. We will identify the interest, value it with the arithmetic shown, and tell you honestly if you should keep it. Free, no obligation, and no mailing list.
Get a Free Valuation Ask a LandmanLast reviewed August 2026. Statutes, rates, and case law change, and where Alabama law is genuinely unsettled we have said so rather than filling the gap. Berlin Royalties is a mineral buyer and a landman shop in Tulsa, not a law firm or a tax advisor, and this guide is general information rather than advice about your interest. For a dispute worth real money, hire a lawyer in Alabama.