Every month, somewhere in Texas, an oil company mails its partners a detailed bill. It lists every charge on the well, line by line. If a partner disagrees, it can challenge the charge. It can also audit the operator’s books.
The royalty owner on that same well gets a single net number. No bill, no backup, and usually no royalty audit right in the lease. This is part four of What Your Oil Company Won’t Show You.
In This Article:
Who Gets to Audit the Operator’s Books?
The operator’s working interest partners do. When companies share a well, they usually sign a joint operating agreement. That agreement typically attaches an industry accounting procedure, commonly called COPAS. Under it, non-operating partners get itemized monthly bills. They also get the right to audit the joint account.
Partner audits are not rare events. Partners commonly hire auditors to test an operator’s charges. The accounting procedure also limits how much overhead an operator may bill its partners.
Those partners are not doing the operator a favor. They are protecting their money. The industry built this system because nobody should pay a bill they cannot check.
Should your lease include audit rights?
Talk with a Texas attorney who has read operator partner bills from the inside.
Why Doesn’t the Royalty Owner Get the Same Rights?
Mostly because royalty owners rarely ask for them. Operators write leases, and printed lease forms seldom grant audit rights. Owners sign those forms without knowing what the partners receive.
The legal relationship is different too. A working interest partner pays a share of drilling and operating costs. Royalty owners do not. Operators point to that difference when they refuse audit rights.
That argument weakens once the lease makes the owner share post-production costs. Texas law generally puts those costs on a royalty unless the lease says otherwise. The Texas Supreme Court restated that rule in an April 2026 opinion. At that point, the owner pays part of the same bills. The only difference is that the partners get to see them.
Does Texas Law Give Royalty Owners a Royalty Audit?
Not in the form partners enjoy. Texas statutes give royalty owners certain information rights. For example, an owner can request an explanation of deductions. Those rights are real, but they are limited.
An explanation is not an itemized monthly bill. It is not a stack of invoices. Nor is it the right to send an auditor into the operator’s records. For that level of access, royalty owners generally need the lease to say so.
That is the gap this series keeps returning to. The information exists. Partners receive it every month. Yet the royalty owner, who shares the same production, usually does not.
The Landowner’s Perspective: Two Desks, One Stream
Nixon Daughtrey has worked from both desks. He spent nearly a decade as a licensed attorney and landman inside oil companies. His work also included time with a non-operating partner. There, he read the monthly bills described above.
From that seat, the royalty owner and the operator look a lot like partners. They share the same wells, the same gas, the same pipeline, and the same buyer. Yet only one of them gets to check the math.
Adding one more name to a report the operator already sends costs almost nothing. Our mineral lease review treats the right to verify as a baseline, not a bonus. We frame it as a request for what the industry already gives its partners. It is also why your royalty statement alone cannot fill the gap.
Next in the series: a dozen owners, one lease, no receipts.
Frequently Asked Questions
What is a royalty audit?
It is a review of the operator’s records to confirm royalty was paid correctly. Full audit rights usually come from negotiated lease terms.
What is a joint operating agreement?
A joint operating agreement is the contract between companies that share a well. It sets who operates and how costs are split. Its accounting terms also control how partners check the bills.
Will an operator agree to give me audit rights?
Some will and some will not. Operators resist money terms. Information terms come up in lease negotiation more often than owners expect.
Mineral lease review for Texas landowners
We treat the right to verify your royalty as a baseline term, not a bonus.
Conclusion
The oil industry already knows how to show its work. It does so every month for the partners who share the costs. A royalty owner who shares those costs deserves the same view.
The Daughtrey Law Firm focuses exclusively on representing Texas landowners and mineral owners. Is your lease offer silent on audit rights? We can tell you what that silence costs.
This article provides general information about Texas property law and is not legal advice for your specific situation. Reading this article does not create an attorney-client relationship. For advice about your situation, contact a qualified attorney.
