Fasken Oil and Ranch, Ltd., Fasken Land and Minerals, Ltd., and Fasken Management, LLC, as General Partner of Fasken Oil and Ranch, Ltd., and Fasken Land and Minerals, Ltd. v. Baldomero A. Puig, III, Emily P. Kenna, James W. Puig, and Priscilla P. Oberton

Supreme Court of Texas
                           ══════════
                            No. 24-1033
                           ══════════

 Fasken Oil and Ranch, Ltd., Fasken Land and Minerals, Ltd.,
and Fasken Management, LLC, as General Partner of Fasken Oil
     and Ranch, Ltd., and Fasken Land and Minerals, Ltd.,
                             Petitioners,

                                   v.

  Baldomero A. Puig, III, Emily P. Kenna, James W. Puig, and
                     Priscilla P. Oberton,
                             Respondents

   ═══════════════════════════════════════
               On Petition for Review from the
       Court of Appeals for the Fourth District of Texas
   ═══════════════════════════════════════

                       Argued March 3, 2026

      JUSTICE BLAND delivered the opinion of the Court.

      We are once again asked to determine whether to calculate a “free
of cost” royalty interest based on gas produced at the wellhead or gas
processed and sold downstream. Unless the parties agree otherwise, a
cost-free royalty on produced minerals is calculated free of exploration
and production costs, but it bears costs incurred to enhance and
transport the raw minerals for downstream sale. Parties can deviate
from this rule with language reflecting a royalty calculated on the
enhanced, downstream products or language that adds postproduction
costs to the base royalty.1
       The operators historically valued the royalty interest at issue in
this case at the well. Thus, the operators deduct postproduction costs
from the sales price obtained at market downstream to arrive at the
value of the raw minerals produced at the well. In 2021, the royalty
owners challenged this practice, contending the royalty instead is based
on a downstream sales price for processed gas. The trial court ruled for
the royalty owners, but it granted the operators permission to appeal.
The court of appeals accepted the appeal and affirmed.
       We reverse. By its plain language, the deed reserves a royalty on
minerals “produced from the above described acreage,” not a royalty on
minerals transported, processed, or otherwise enhanced for sale at an
unspecified downstream point. The deed lacks language indicating that
the royalty is calculated based on processed gas at a point downstream
rather than gas produced at the well. Nor does the deed specify that the
royalty is based on gross proceeds from a downstream sale. The term
“free of cost forever” in the deed restates the rule that the royalty is
calculated without deduction of costs incurred in exploring for and
producing the minerals. Standing alone, the phrase does not transform




       1 Devon Energy Prod. Co. v. Sheppard, 668 S.W.3d 332, 347 (Tex. 2023)

(“[T]o make a royalty free of postproduction costs, a lease could change the
point at which it was valued or specify that something would be added to the
royalty base.” (citing Heritage Res., Inc. v. NationsBank, 939 S.W.2d 118, 131
(Tex. 1996) (Owen, J.) (plurality op.))).


                                      2
a royalty on raw minerals into a royalty on processed minerals sold
downstream as products.
                                      I
       B. A. Puig, Jr., the Puigs’ predecessor in interest, reserved a
nonparticipating royalty interest when he sold Webb County ranchland
to Palafox Exploration Company in 1960 (the “Puig Deed”).2 The deed
provides:
       There is SAVED, EXCEPTED AND RESERVED, in favor
       of the undersigned, B. A. Puig, Jr., out of the above
       described property, an undivided one-sixteenth (1/16) of all
       the oil, gas and other minerals, except coal, in, to and under
       or that may be produced from the above described acreage,
       to be paid or delivered to Grantor, B. A. Puig, Jr., as his
       own property free of cost forever. Said interest hereby
       reserved is Non-Participating Royalty . . . .
       Fasken Oil and Ranch, Ltd.,3 the successor in interest to Palafox
Exploration Company, operates oil and gas wells on the relevant
leaseholds. After Fasken produces minerals from the wells, it
transports, treats, processes, and sells them as condensate and natural
gas. Fasken historically deducted the costs incurred between the
wellhead and the point of sale from the price obtained for the processed
gas to arrive at a market value used to calculate the Puigs’ royalty on
the produced minerals.




       2 The Puigs include Baldomero A. Puig, III, Emily P. Kenna, James W.

Puig, and Priscilla P. Oberton.
       3 In addition to Fasken Oil and Ranch, Ltd., petitioners include Fasken

Land and Minerals, Ltd., and Fasken Management, LLC, as General Partner
of Fasken Oil and Ranch, Ltd., and Fasken Land and Minerals, Ltd.


                                      3
      In 2021, the Puigs challenged this calculation and sued Fasken.
The Puigs sought a declaration that their royalty is free of downstream
postproduction costs, meaning it is calculated based on the sales price
obtained for enhanced minerals at a downstream market rather than
the market value of the raw minerals when produced. Fasken responded
that the Puigs’ royalty is calculated based on the value of gas “produced
from the above described acreage,” not a downstream sales price.
      The trial court granted summary judgment for the Puigs, ruling
that the royalty is calculated free of postproduction costs with the
exception of severance taxes, which the Puigs concede they bear. The
trial court also certified an interlocutory appeal on a controlling question
of law: “Does the [deed’s] ‘free of cost forever’ language preclude the
deduction of post-production costs?”4
      The court of appeals accepted the appeal and affirmed.5 Relying
on Chesapeake Exploration, L.L.C. v. Hyder,6 the court concluded that
“free of cost forever” expresses an intent to free the royalty of
downstream costs for determining the market value of the produced
minerals.7
      We granted Fasken’s petition for review.




      4 See Tex. Civ. Prac. & Rem. Code § 51.014(d).


      5 726 S.W.3d 499, 506 (Tex. App.—San Antonio 2024).


      6 483 S.W.3d 870 (Tex. 2016).


      7 726 S.W.3d at 505–06.




                                      4
                                      II
       Fasken contends that the deed establishes a valuation based on
minerals “produced from the above described acreage;” that is, the value
of the minerals at the wellhead. The Puigs respond that the royalty is
calculated based on a downstream sales price that, while not specified
in the lease, is implied by the “free of cost forever” language and, in their
view, the absence of any specific valuation point for the produced
minerals.
       The parties presented their competing positions in cross motions
for summary judgment.8 When a trial court denies one cross motion and
grants the other, “we review both, determine all questions presented,
and render the judgment the trial court should have rendered.”9 We
construe the deed as a whole to ascertain the parties’ intent and attempt
to harmonize provisions so none are rendered meaningless.10 We give
terms their “plain, grammatical, and ordinary meaning unless doing so
‘would clearly defeat the parties’ intentions’ or the instrument shows the
parties used the terms in a different or technical sense.”11




       8 We review the trial court’s summary judgment ruling construing the

parties’ deed de novo. Nettye Engler Energy, LP v. BlueStone Nat. Res. II, LLC,
639 S.W.3d 682, 689 (Tex. 2022).
       9 Id.


       10 Id. at 689–90.


       11 Id. at 690 (quoting Barrow-Shaver Res. Co. v. Carrizo Oil & Gas, Inc.,

590 S.W.3d 471, 479 (Tex. 2019)).


                                       5
                                        A
       A nonparticipating royalty is a nonpossessory interest that
“entitles its owner to a share of the production proceeds, free of the
expenses of exploration and production.”12 Unless the parties agree
otherwise, a nonparticipating royalty is subject to postproduction costs
incurred to prepare raw oil or gas for sale downstream, “including taxes,
treatment costs to render [the minerals] marketable, and transportation
costs.”13 This is because “[t]he value of gas ‘at the well’ represents its
value in the marketplace at any given point of sale, less the reasonable
cost to get the gas to that point of sale.”14 To deviate from this general
rule, a royalty agreement must “‘plainly and in a formal way’ express[]
[the parties’] intent . . . to ‘operate differently.’”15




       12 ConocoPhillips Co. v. Hahn, 704 S.W.3d 515, 527 n.17 (Tex. 2024)

(quoting Plainsman Trading Co. v. Crews, 898 S.W.2d 786, 789 (Tex. 1995)).
       13 Heritage Res., 939 S.W.2d at 122 (Baker, J.); see also Burlington Res.

Oil & Gas Co. v. Tex. Crude Energy, LLC, 573 S.W.3d 198, 203 (Tex. 2019)
(discussing costs to prepare produced minerals for sale).
       14 See Heritage Res., 939 S.W.2d at 130 (Owen, J.) (plurality op.); see

also BlueStone Nat. Res. II, LLC v. Randle, 620 S.W.3d 380, 388–89 (Tex. 2021)
(stating that the “workback method” is a proxy for market value at the
wellhead in the absence of directly comparable sales); id. at 388 n.29
(explaining how, on rehearing, the concurring opinion became the plurality
opinion and the majority opinion became a concurring opinion).
       15 Devon, 668 S.W.3d at 346 (quoting Wenske v. Ealy, 521 S.W.3d 791,

797 (Tex. 2017)).


                                        6
       We have recognized two primary ways parties may free a royalty
interest from the postproduction costs it usually bears.16 The first is by
setting the valuation point of the royalty downstream of the well.17 The
second is by employing explicit terms that add some or all
postproduction costs to the royalty base.18 This deed does neither.
       We start with the valuation point. The Puig Deed describes a
geographic location: minerals “produced from the above described
acreage.” “[T]o ‘produce’ is to make or create a product that did not
previously exist, and not to refine or improve a product already in
existence.”19 As the Court has explained, “[p]roduction is the process of
bringing minerals to the surface, and production for raw gas occurs at




       16 Id. at 347 (citing Heritage Res., 939 S.W.2d at 131 (Owen, J.)
(plurality op.) (discussing ways to deviate from the usual allocation of
postproduction costs)). In recognizing these methods, we do not foreclose
others.
       17 See, e.g., id.; Randle, 620 S.W.3d at 391 (“[R]oyalties computed on

gross amounts received means royalties are paid based on point-of-sale
proceeds without deduction of postproduction costs.”); Exxon Corp. v.
Middleton, 613 S.W.2d 240, 245 (Tex. 1981) (“If the parties intended royalties
to be calculated on the amount realized standard, they could and should have
used only a ‘proceeds-type’ clause.”).
       18See Devon, 668 S.W.3d at 347–48 (interpreting a lease to require
postproduction costs enumerated in the lease to “be added to the . . . gross
proceeds” royalty base).
       19 Byron C. Keeling & Karolyn King Gillespie, The First Marketable

Product Doctrine: Just What is the “Product”?, 37 St. Mary’s L.J. 1, 89 (2005)
(citing Produce, Webster’s New World Dictionary (3d college ed. 1988);
Produce, Black’s Law Dictionary (5th ed. 1979)).


                                      7
the wellhead.”20 Although parties to a deed can set the valuation point
and the valuation method independently, absent contrary language, a
royalty in minerals “produced” and nothing more is a royalty valued at
the well.
       Not only is the valuation location in this case geographically
distinct, so is the type of gas.21 A royalty in “produced,” unprocessed
minerals free of costs contrasts with a royalty in “processed” or enhanced
minerals. “The market price of the processed gas reflects the value of the
unprocessed gas at the well only if reasonable postproduction processing
costs are deducted.”22 A royalty on processed gas, in contrast, “share[s]
in the enhanced value of production but not the expenses incurred to
make it so.”23




       20 Randle, 620 S.W.3d at 386–87; see also Middleton, 613 S.W.2d at 244

(“Production means actual physical extraction of the mineral from the land.”);
Keeling & Gillespie, supra, at 88 (stating that “‘production’ ceases once the
[operator] extracts oil or gas from the ground at the wellhead”).
       21 See Carl v. Hilcorp Energy Co., 689 S.W.3d 894, 896 (Tex. 2024)
(stating that a royalty interest in minerals at the well is in “minerals as they
come out of the ground”); see also Heritage Res., 939 S.W.2d at 129 (Owen, J.)
(plurality op.) (“Market value ‘at the well’ means the value of gas at the well,
before it is transported, treated, compressed or otherwise prepared for
market.”); id. at 130 (citing Piney Woods Country Life Sch. v. Shell Oil Co., 726
F.2d 225, 231 (5th Cir. 1984) (“‘At the well’ therefore describes not only location
but quality as well.”)).
       22 Burlington Res., 573 S.W.3d at 203–04 (quoting French v. Occidental

Permian Ltd., 440 S.W.3d 1, 3 (Tex. 2014)).
       23 Devon, 668 S.W.3d at 336–37; see also Danciger Oil & Refineries, Inc.

v. Hamill Drilling Co., 171 S.W.2d 321, 322 (Tex. 1943) (distinguishing gas “if,
as and when produced” from gas after “it ha[s] been processed into a product
of a higher value”).


                                        8
       We interpreted similar “produced” language in Carl v. Hilcorp
Energy Co., in which we concluded the deed calculated a royalty on “gas
. . . produced from said land and sold or used off the premises” based on
the value of the gas at the well.24 The disputed deed in Carl included a
“market value at the well” term unlike the deed in this case.25 The
“produced from the above described acreage” in the Puig Deed, however,
is functionally equivalent to the at-the-well term in Carl: it identifies
“the physical spot at which [the Puigs’] interest in the products arises,”26
indicating “that the royalty interest is in the minerals as they come out
of the ground, not after . . . ‘post-production’ efforts have increased the
minerals’ value.”27
       The Puig Deed contrasts with agreements calling for a valuation
away from the wellhead that employ terms it critically lacks. In
BlueStone Natural Resources II, LLC v. Randle, we explained that
“gross proceeds” language differs from an at-the-well valuation point or
a net-proceeds measurement.28 A deed calling for valuation based on the
“amount realized,” “proceeds,” “gross value received,” or another




       24 689 S.W.3d at 897.


       25 Id.


       26 Burlington Res., 573 S.W.3d at 207; see also id. at 211 (interpreting

“agreements [that] provide that the royalty interest shall be delivered ‘into the
pipelines, tanks, or other receptacles with which the wells may be connected’”
to fix valuation at “the physical spot where the interest must be delivered—at
the wellhead or nearby”).
       27 Carl, 689 S.W.3d at 896.


       28 620 S.W.3d at 391.




                                       9
gross-proceeds term is “based on point-of-sale proceeds.”29 Absent
limiting language, such terms may create a royalty free from
postproduction costs.30
       “Produced from the above described acreage” is the opposite of a
term that sets the valuation at a downstream point. While minerals
must be produced regardless of a royalty interest valuation point, in the
absence of language calling for a royalty on transported, processed,
treated, or otherwise enhanced minerals downstream, a royalty on
minerals “produced” is a royalty valued at the wellhead.
       The term “free of cost forever” does not change the valuation point
or formally relieve the royalty of any postproduction costs incurred to
enhance the value of the produced minerals. “Forever” refers to the
temporal duration of the royalty interest, not to the geographic location
of valuation.31 We have said that language similar to the “free of cost
forever” language in this deed does “nothing to change the valuation
point,”32 much less to a location where the enhanced minerals are sold.
When a royalty provision calls for valuation at the well, a cost-free term
does not free a royalty of postproduction costs because such costs are not



       29 Id. at 389–91. This language can be modified by other terms, such as

“net” or “at the well,” that may require the lessor to bear postproduction costs.
Id.
       30 Id.


       31 See Hancock v. Butler, 21 Tex. 804, 817 (1858) (stating that “forever”

is “a word of time”); Forever, American Heritage Dictionary (1st ed. 1969)
(“1. For everlasting time; eternally.”).
       32 Devon, 668 S.W.3d at 347 (citing Heritage Res., 939 S.W.2d at 130–31

(Owen, J.) (plurality op.)).


                                       10
incurred to produce the minerals.33 This is true even when the cost-free
term refers to specific postproduction costs, like the clause in Heritage
Resources, Inc. v. NationsBank, which expressly stated “there shall be
no deductions from the value of Lessor’s royalty [for] processing, cost of
dehydration, compression, transportation or other matter to market
such gas.”34 Absent reference to another valuation point or calculation
method in the deed, cost-free language merely restates the rule that a
royalty interest is free of costs incurred in exploring for and producing
the raw minerals.35
       For the same reason, “free of cost forever” does not “‘plainly and
in a formal way’ express[] [the parties’] intent” to reallocate
postproduction costs.36 This general reference emphasizes that the
reserved royalty interest is free of production costs. The Puig Deed
employs language traditionally used to create a mineral interest, and
the cost-free term in the granting clause distinguishes the royalty
interest reserved from a mineral interest that typically bears such costs.




       33 See id. (explaining that anti-deduction language does not relieve a

royalty valued at the well of postproduction costs “for the simple—and
mathematical—reason that there aren’t any postproduction costs to ‘deduct’
when value is determined at the well”); see also Randle, 620 S.W.3d at 393 n.64
(“[N]o-deductions provisions have been construed as surplusage with respect
to royalties valued at the well . . . .”).
       34 939 S.W.2d at 130 (Owen, J.) (plurality op.).


       35See, e.g., Hyder, 483 S.W.3d at 873–74 (explaining that cost-free
language is commonly used to “simply emphasize that the . . . royalty is free of
production costs”).
       36 Devon, 668 S.W.3d at 346 (quoting Wenske, 521 S.W.3d at 797).




                                      11
       The Puig Deed provides for a royalty on minerals “in, to and under
or that may be produced from the above described acreage.” We
interpreted a similar phrase in Temple-Inland Forest Products Corp. v.
Henderson Family Partnership, Ltd.37 The deed in that case, much like
the deed here, had a granting clause reserving an interest “in, to and of
all oil, gas, and other minerals . . . that may be produced from the
following described land.”38 We observed this language ordinarily
creates a mineral interest,39 but “free of cost” language elsewhere in the
deed indicated the parties’ intent to convey a royalty interest, not a
mineral interest.40 “[F]ree of cost forever” clarifies the grantor’s
reservation of a royalty free of production costs, rather than a mineral




       37 958 S.W.2d 183 (Tex. 1997).


       38 Id. at 184 (alteration in original).


       39 Id. at 185 (citing Watkins v. Slaughter, 189 S.W.2d 699, 700–01 (Tex.

1945), and Altman v. Blake, 712 S.W.2d 117, 117–18 (Tex. 1986)); see also
Altman, 712 S.W.2d at 117–18 (explaining that a deed conveying “a 1/16
interest in and to all of the oil, gas and other minerals in and under and that
may be produced from said land” denotes a mineral interest); Ernest E. Smith
& Jacqueline L. Weaver, 1 Texas Law of Oil and Gas § 3.5(A) (2025) (“The
traditional language used to create a mineral fee is a reference to the oil, gas,
and other minerals ‘in, on, and under’ or ‘in and under’ the described land.”).
       40 Temple-Inland, 958 S.W.2d at 186. In Wintermann v. McDonald, the

Court interpreted “free royalty” in a statute to conclude the State, in granting
land, reserves a royalty interest, not a mineral interest. 102 S.W.2d 167, 173
(Tex. 1937). Unlike private leases, public leases conveyed by the State are
“construed strictly in favor of the State.” Magnolia Petrol. Co. v. Walker, 83
S.W.2d 929, 934–35 (Tex. 1935) (quoting Empire Gas & Fuel Co. v. State, 47
S.W.2d 265, 272 (Tex. 1932)). This rule does not apply to mineral conveyances
between private parties. Schwarz v. State, 703 S.W.2d 187, 189 (Tex. 1986).


                                        12
interest burdened by them, in deed language that could be construed as
creating either.
       The Puigs urge that their deed identifies the interest as a
“Non-Participating Royalty Interest,” which sufficiently distinguishes
their interest from a mineral interest without cost-free language. As we
have recognized, however, drafters often use cost-free language to stress
that an agreement conveys a royalty interest free of production costs. 41
“[F]ree of cost forever” restates the rule that the royalty is free of the
costs of exploring for and producing the minerals. The Puigs’
construction of the language “would improperly convert the royalty
interest from a royalty on raw products at the well to a royalty on
refined, downstream products.”42 We cannot rewrite or add to the deed
to reach such a result.43
       The deed’s in-kind provision further supports the construction
that “free of cost” refers to exploration and production costs when
valuing the minerals “produced from the above described acreage.” The
royalty in the Puig Deed is “to be paid or delivered,” meaning that it can
be paid in cash or delivered in kind at the well.44 But the deed does not



       41 Hyder, 483 S.W.3d at 873–74.


       42 Burlington Res., 573 S.W.3d at 205.


       43 See Nettye, 639 S.W.3d at 695 (“[W]e cannot rewrite or add to [an]

instrument under the guise of interpretation.”).
       44 See Myers-Woodward LLC v. Underground Servs. Markham, LLC,

716 S.W.3d 461, 473 (Tex. 2025) (“Deed language contemplating delivery of the
production to the royalty holder creates an in-kind royalty.”). A royalty owner




                                      13
designate who chooses between the two alternatives. In Hyder, we
allowed a cash royalty to be free of postproduction costs even if the
royalty in kind bears them, noting that the royalty owner in that case
held the right to choose between the two.45 As we more recently observed
in Burlington Resources Oil & Gas Co. v. Texas Crude Energy, LLC,
however, it would be strange for parties to contract for the value of the
royalty to turn on the method of delivery.46
       Unlike the agreements in Hyder and Burlington Resources, the
Puig Deed does not grant the Puigs the right to choose between a cash
or an in-kind royalty. If the royalty is free of postproduction costs when
paid in cash but not when delivered in kind, the Puigs have every
incentive to choose a cash royalty.47 Fasken, in contrast, has every
incentive to choose to deliver the royalty in kind, avoiding the penalty
for enhancing the value of the raw minerals postproduction.48 A contract




who receives a royalty in kind is entitled to the owner’s share of the minerals
produced as an alternative to the share’s cash value. See Nettye, 639 S.W.3d at
684, 685 n.5.
       45 Hyder, 483 S.W.3d at 872 (interpreting “each Lessor has the
continuing right and option to take its royalty share in kind”); id. at 875
(stating that if the royalty owner chooses to take their royalty in kind, they
“might use the gas on the property, transport it themselves to a buyer, or pay
a third party to transport the gas to market”).
       46 573 S.W.3d at 210–11 (reasoning that it would be odd for parties to

intend for an at-the-well provision to apply only to in-kind delivery because the
royalty value would turn on the method of delivery and the operator “would be
penalized for . . . post-production enhancements” if the royalty is paid in cash).
       47 See id. at 211.


       48 See id.




                                       14
that permits either party to manipulate the price via the method of
delivery without establishing who chooses the method is far less
plausible than a contract that, by fixing valuation of the royalty based
on minerals produced at the wellhead, provides for a royalty of equal
value regardless of the method of delivery. Parties are “free to contract
for . . . odd results,”49 but we will not reach to find them outside the text
of the deed.
       Finally, though our construction turns solely on the deed’s text,50
we note that the parties’ uniform course of conduct is consistent with
our reading of the deed’s language. The Puigs do not dispute that their
royalty payments have historically been burdened by postproduction
costs. This “seem[s] normal and reassuring” in light of our interpretation
of the text.51
                                      B
       The court of appeals relied on the Court’s opinion in Hyder to
reach its conclusion that the “free of cost forever” language in the Puig
Deed includes postproduction costs. This phrase, plucked from its
context, ignores the Court’s holistic analysis of the Hyder lease. In
Hyder, the lease at issue contained three royalty provisions. From the
outset, we noted the general rule that “a royalty is free of production



       49 Id.


       50 See id. at 206 (“Where contracts are unambiguous, we decline to
consider the parties’ course of performance to determine [their] meaning.”).
       51 Clifton v. Johnson, ___ S.W.3d ___, 2026 WL 705763, at *5 (Tex. Mar.

13, 2026) (“It would be surprising for parties to misinterpret (or disregard)
their own legal instrument from the very beginning.”).


                                     15
expenses but ‘usually subject to post-production costs.’”52 Applying this
general rule to the first two royalty clauses in the lease, we
concluded: (1) the oil royalty was burdened by postproduction costs
because it was paid based on market value at the well; and (2) the gas
royalty was free of postproduction costs because it was paid based on
“the price actually received” by the operator.53 We then turned to the
third royalty clause, calling for “‘a perpetual, cost-free (except only its
portion of production taxes) overriding royalty of five percent (5.0%) of
gross production obtained’ from directional wells.”54
      While we agreed that “cost-free” may “literally refer[] to all
costs,”55 that phrase alone does not free a royalty of postproduction costs
because it says nothing about a valuation point. To the contrary, we
acknowledged that cost-free language commonly refers to production
costs only.56 It was the lease’s additional language in Hyder that
provided crucial context to the “cost-free” term. Most notably, the royalty
provision contained a parenthetical exempting “production taxes” from




      52 Hyder, 483 S.W.3d at 872 (quoting Heritage Res., 939 S.W.2d at
121–22) (Baker, J.)).
      53 Id. at 871–72, 873. Language stating that the gas royalty was “free

and clear of all production and post-production costs and expenses” had “no
effect on the meaning of the provision” because the “price actually received”
language—not the anti-deduction language—changed the valuation point to
the point of sale. Id. at 872–73.
      54 Id. at 872.


      55 Id. at 874.


      56 See id. at 873–74.




                                     16
the “cost-free” term.57 This exemption, we concluded, showed the parties’
intent to deviate from the general rule.58 Because the Court
characterized the taxes as a postproduction cost, “[i]t would make no
sense to state that the royalty is free of production costs, except for
postproduction taxes.”59 As the Court put it, such a reading is akin to
stating “no dogs allowed, except for cats.”60 Having concluded that the
parenthetical reflected the parties’ intent to free the royalty from other
kinds of postproduction costs, the Court considered the remaining
language of the royalty provision. “[G]ross production obtained”
addressed the volume used to value the royalty, not the valuation
point.61 And because the royalty owner retained the right to choose the
method of delivery (and its consequences), the in-kind provision did not
overcome the specific exclusion of one postproduction expense as an
indication that others were to be included.62
      In       contrast,    the   Puig   Deed   contains   no   reference   to
postproduction expenses indicating the parties intended “free of cost
forever” to reallocate postproduction costs or to base the royalty on an




      57 Id.


      58 Id. at 874.


      59 Id.


      60 Id.


      61 Id. at 874–75 (stating that “gross production” refers to “the entire

amount of gas produced, including gas used by [the operator] or lost in
postproduction operations”).
      62 Id. at 872, 875.




                                         17
unspecified sales price for processed gas as opposed to the stated royalty
on produced gas. The deed does not include other royalty clauses
employing downstream valuation points, nor does it expressly grant the
royalty owner the right to elect whether to take the royalty in cash or in
kind. Unlike the lease in Hyder, this deed reserves a royalty on minerals
produced at the well where “there aren’t any postproduction costs to
‘deduct.’”63
                              *       *      *
       The Puig Deed restates the rule that a royalty is free of costs
incurred in exploring for and producing minerals. It reserves a
nonparticipating royalty in minerals produced at the well that bears the
usual postproduction costs. We hold that the “free of cost forever”
language refers to raw minerals produced at the wellhead, not to
processed minerals sold downstream. Thus, it does not preclude
deduction of postproduction costs from a downstream sales price to
arrive at the market value of raw minerals produced at the wellhead.
Accordingly, we reverse the judgment of the court of appeals, render
partial summary judgment for Fasken, and remand the case to the trial
court for further proceedings consistent with this opinion.



                                           Jane N. Bland
                                           Justice

OPINION DELIVERED: April 10, 2026




       63 Devon, 668 S.W.3d at 347.




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