There are three strategies generally used for computing and setting up the royalty payment and the way it is valued. The first method is market price and price of the oil or gas. Sometimes the market price at the well in the field is used as the prevailing price. Landowners usually were taking the sector price at the well because it allows the cost to rise as the cost of crude oil and gas rises. Some leases have royalty clauses that state that the royalty is set at the maximum price or percentage posted for fields within one hundred miles by any major oil agency for identical grades and gravity on the day that the oil is got rid of.
“Royalties payable to Lessor are a on oil, and on condensate saved at the well, one eighth of that produced and saved from said land, an identical to be brought at the well or to the credit of Lessor in the pipe line to which the wells are connected. Lessee may every so often acquire one of these royalty oil or condensate in its ownership, paying market price hence winning for the sphere where produced for oil or condensate of like kind and gravity on the date of acquire. b On gas, including casting head gas or other gaseous components, produced and saved from said land 1 when sold by Lessee, one eighth of the net proceeds realized there from by the Lessee computed at the mouth of the well or 2 when used by Lessee in the manufacture of gasoline or other items, so synthetic, plus one eighth of the web proceeds found out by the Lessee from sale of the residue gas computed at the mouth of the well, or 3 when ‘utilized by Lessee off said land for every other intention, the market value, computed at the mouth of the well, of one eighth of the gas so used.