Jillford64,
The language of the rules is complex but, generally speaking, if the owner of a mineral and/or royalty interest receives royalty payments on production, then the owner likely qualifies for a depletion deduction.
There are two types of depletion deductions available for oil & gas income: percentage depletion and cost depletion. Percentage depletion is a flat 15%, whereas cost depletion is a much more complicated calculation which depends on the owner’s cost basis in the property among other factors. If the owner has significant basis in the property, then cost depletion could provide a larger deduction than percentage depletion. Cost depletion can also be used to offset lease bonus income in certain situations. Both types of depletion can be a valuable deduction for oil & gas interest owners. You can read more about this topic in one of my posts here.
The depletion rules are complex and this is a general overview for informational purposes only. Consult a qualified professional regarding the application of these rules to any specific situation.