In April 2026 the Texas Supreme Court held that 'free of cost forever' in a royalty deed does not stop an operator deducting post production costs. If your Texas lease or deed relies on cost free language, that decision changed what your interest is worth.
Texas is the biggest mineral market in the country and the noisiest: more mailers, more flippers, and more option contract games than anywhere else. It is also the state where the law moved most recently, and not in the owner's favor.
Berlin works the Anadarko Basin across the Oklahoma line daily and brings the same show the work underwriting to every Texas basin. What follows is the Texas law that actually decides what your interest is worth.
If you take one thing from this page, take this.
In Fasken Oil and Ranch, Ltd. v. Puig, No. 24-1033 (Tex. Apr. 10, 2026), the Texas Supreme Court considered a 1960 deed reserving a royalty "free of cost forever." The trial court and the San Antonio Court of Appeals both held that language barred the deduction of post production costs, relying on Chesapeake Exploration, L.L.C. v. Hyder, 483 S.W.3d 870 (Tex. 2016).
The Supreme Court reversed. It held that "free of cost forever" refers only to exploration and production costs, not to the downstream costs of processing and transporting the product, and that it does "nothing to change the valuation point." The words "produced from the above described acreage" established an implied valuation point at the wellhead, and once royalty is valued at the wellhead, Heritage Resources, Inc. v. NationsBank, 939 S.W.2d 118 (Tex. 1996), permits an operator to deduct post production costs from the downstream sale price to arrive at wellhead value.
The Court distinguished Hyder on a narrow ground: Hyder's clause said "cost-free (except only its portion of production taxes)," and that parenthetical exception showed an intent to deviate from the general rule. The Puig deed had no such parenthetical.
What this means practically. "Free of cost," "cost-free," and "free of cost forever" are no longer sufficient on their own to bar post production deductions in Texas. To get a genuinely cost free royalty you now need one of three things: language that expressly changes the valuation point to the point of sale or downstream, language specifying that costs are added back to the royalty base, or "price actually received" language, which under Hyder moves the valuation point on its own.
A great many Texas royalty clauses were negotiated over the years on the understanding that "cost free" was a term of art meaning no post production costs. After Fasken, that understanding is wrong.
We read your specific instrument against this before we quote a number, and we will tell you which side of the line your language falls on. That analysis is free and it is yours whether or not you sell to us.
This one runs the other way and it is worth real money to families with old deeds.
In Van Dyke v. The Navigator Group, 668 S.W.3d 353 (Tex. 2023), the Court construed a 1924 deed reserving "one-half of one-eighth of all minerals and mineral rights." Read arithmetically that is one sixteenth. The Court held it reserved one half.
The reasoning is the estate misconception: for decades, landowners and drafters commonly assumed the mineral estate itself was one eighth, because one eighth was the customary royalty. So when courts see a double fraction involving 1/8 in an antiquated instrument, they now begin with a rebuttable presumption that the 1/8 refers to the entire mineral estate, not to one eighth of it.
The presumption is rebuttable, and in Clifton v. Johnson (Tex. Mar. 13, 2026) the Court held it was rebutted where the deed expressly multiplied the fractions to a single product, such as "1/128 (1/16 of the usual 1/8 royalty)." Where the instrument does that arithmetic itself, the parenthetical is explanatory rather than a term of art and the stated number controls. Clifton also signals the presumption reaches royalty interests, not only mineral interests. Separately, in ConocoPhillips Co. v. Hahn, 704 S.W.3d 515 (Tex. Dec. 31, 2024), the Court held that ratifying a lease does not convert a fixed royalty to a floating one, though a stipulation of interest can.
The current rule in one sentence: start with the Van Dyke presumption, then ask whether the instrument expressly multiplies the fractions to a single number. If it does, the number controls. If it does not, you may own eight times what you thought.
If a family deed of yours contains a double fraction, send it to Ask a Landman. We read these free.
Oklahoma owners get a pooling order with a twenty day clock. Texas owners generally do not, and this is the most owner favorable structural feature of Texas mineral law.
The Mineral Interest Pooling Act, Tex. Nat. Res. Code chapter 102, enacted in 1965, is the only compulsory pooling mechanism in Texas and it was built to be difficult. The limits that matter:
The practical consequence: if a Texas operator cannot get you to lease, it generally must lease around your tract, drill so as not to drain you, or leave you unleased and unbound. There is no election clock running against you. Compare Oklahoma, where a pooling order gives you twenty days and failing to elect generally deems you to have taken the smallest royalty and largest bonus.
That leverage is worth something, and it should be part of how you think about whether to lease, sell, or hold.
Texas has no dormant mineral act, no mineral lapse statute, and no marketable title act that extinguishes severed minerals. An interest your great grandmother reserved in 1931 and nobody has touched since is still yours. That puts Texas with Montana and Wyoming and squarely against Kansas, North Dakota, and Ohio, where doing nothing for twenty years can cost you the interest.
Two honest caveats so the claim is accurate. Texas minerals can still be lost to adverse possession, which is difficult against a severed mineral estate because it generally requires actual production rather than surface use. And they can be lost to tax foreclosure where minerals are separately assessed. Separately, suspended royalty proceeds escheat to the Comptroller after the dormancy period, though the underlying mineral interest does not.
And on your sale: nothing. Texas has no state individual income tax, so there is no Texas tax on your capital gain and no withholding at closing. Compare Colorado at 2 percent withheld on nonresident sales over $100,000, or West Virginia at 2.5 percent. See taxes when you sell mineral rights.
Texas is not a Public Land Survey System state. Descriptions run by abstract number and original survey, league, or labor rather than by section, township and range. That makes it genuinely harder for a Texas owner to research their own interest than it is for an Oklahoma owner, and it makes title work different.
We do that research free. Send a check stub, a deed, a division order, a tax notice, or just a survey name and a county, and we will run the Railroad Commission and county records and tell you what is there.
Worth knowing if anyone approaches you about brine rights in East or Northeast Texas.
In Cactus Water Services, LLC v. COG Operating, LLC, No. 23-0676 (Tex. June 27, 2025), the Court held that produced water is oil and gas waste and, absent an express reservation, a deed or lease conveying oil and gas rights conveys the produced water as part of the mineral estate. A surface owner wanting to keep it must expressly reserve it.
The holding is narrow, and Justice Busby's concurrence exists to say so. The Court addressed ownership of the water, not ownership of the valuable substances dissolved in it. Whether the mineral lessee owns the lithium is not settled in Texas. SB 1763 in the 2025 session would have defined brine minerals as part of the mineral estate and it died in committee. Regulation is clearer than ownership: SB 1186 confirmed Railroad Commission jurisdiction over brine mining and the RRC adopted new rules at 16 Tex. Admin. Code section 3.82, effective February 2025.
If you are being offered a brine lease in Texas, the honest position is that the ownership law is unresolved, and anyone telling you otherwise is overstating. See our Smackover and lithium brine page.
Last reviewed August 2026. Texas royalty law moved twice in 2026 and continues to develop. Berlin Royalties is a mineral buyer and a landman shop in Tulsa, not a law firm or a tax advisor, and this page is general information rather than legal advice about your deed or your lease. For a Texas royalty or title dispute, hire a Texas oil and gas attorney.
Send a check stub, a deed, a lease, or a survey and abstract. We will read your language against Fasken and Van Dyke, tell you what we think you own and what your deductions position is, value the interest with the reasoning shown, and tell you honestly if holding beats selling.
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The most valuable minerals on earth, and the most misvalued by mass mailers.
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