Wyoming’s legislature addressed these problems by passing the Wyoming Royalty Payment Act, which: i) sets deadlines for payment by the operator; ii) requires operators to “report” what is being paid and deducted each month; iii) provides default rules for what can be deducted; and iv) imposes strict penalties on operators who fail to fully and timely pay.   Finally, landowners are entitled to write and receive answers to inquiries about the royalties they are to be paid.

One of the most overlooked features of the Wyoming Royalty Payment Act is that it provides default rules for what can and cannot be deducted in calculating royalties and overriding royalties.  The Act provides that “unless otherwise expressly provided by specific language in an executed written agreement,” several deductions are not permitted in the payment of royalty and overriding royalty.  Specifically, unless some signed agreement otherwise specifically provides, the operator may not deduct, among other things, costs relating to "drilling and completion, pumping or lifting, recycling, gathering, compressing, pressurizing, heater treating, dehydrating, separating, storing or transporting the oil to the storage tanks or the gas into the market pipeline..." W.S. § 30-5-304(iv) (2021). 

Operators must itemize their deductions on statements provided with payments.  Royalty owners should check their lease and paystubs regularly to ensure that no improper deductions are being taken, and that they are being paid all they are entitled to.  If it’s unclear what is being deducted, the Wyoming Royalty Payment Act gives you the tools you need to find out.