ConocoPhillips Sold 43,000 South Texas Acres for $1.2 Billion. At 63, a Landowner Can Keep Getting Oil Royalties Without Social Security Calling Them Work.

ConocoPhillips Sold 43,000 South Texas Acres for $1.2 Billion. At 63, a Landowner Can Keep Getting Oil Royalties Without Social Security Calling Them Work.

Gerelyn Terzo

Thu, September 17, 2026 at 5:05 PM GMT+3 5 min read

• COP -1.02%

Quick Read

• Nonoperating oil and gas royalties generally don't trigger Social Security's earnings test, letting mineral owners collect both royalties and early benefits simultaneously.

• A working interest that shares in well development costs is treated as a business, making that income subject to Social Security's earnings test.

• Royalties are still taxable ordinary income and can push up to 85% of Social Security benefits into taxable income above the $34,000 threshold.

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ConocoPhillips (NYSE: COP) has been pruning assets after its Marathon Oil acquisition, and one of the latest sales put a $1.2 billion price tag on 43,000 net acres in South Texas. NGP-backed Ensign Natural Resources II bought the Eagle Ford position in a July transaction. For mineral owners underneath those acres, the operator may change while the royalty checks keep coming.

Picture a 63-year-old ranch owner considering Social Security. He owns the minerals, another company drills the wells, and his share of production arrives as a royalty payment. Does that oil money count as earnings under Social Security's retirement earnings test? For a typical nonoperating royalty owner, generally not.

Leave the Royalty Check Alone

Someone under full retirement age (FRA) all year can earn $24,480 in 2026 before Social Security starts withholding $1 in benefits for every $2 above the limit. But the test generally counts wages and net earnings from self-employment, not every kind of taxable income.

Social Security Administration guidance describes the usual oil-and-gas lease this way: the landowner grants an operator the right to drill, the operator pays the development and operating costs, and the owner receives a royalty from production. SSA excludes that landowner income when computing self-employment income. The IRS similarly directs royalties from oil, gas and mineral properties that are not operating interests to Schedule E. So a mineral owner can receive a large royalty check without that payment, by itself, triggering the earnings test.

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A Working Interest Changes Things

The line shifts when the owner is participating as an operator. A working interest means sharing in the costs and economics of developing or operating the well. The IRS generally directs operating oil-and-gas interests to Schedule C, while SSA says ownership and operation of a working interest constitutes a business. Depending on how the venture is held, that income can become net earnings from self-employment.

Suppose our 63-year-old's full-retirement-age benefit is $2,400 a month. Starting exactly at 63 would generally pay 75% of that amount, or about $1,800 monthly. If he receives $80,000 of ordinary nonoperating royalties, those royalties generally do not cause Social Security to withhold that early benefit. If the same income reflects net earnings from an operating business, the analysis changes. The claiming age question sits on top of all of that, and we condensed the 62 versus 67 versus 70 math into a free one-page framework if it helps frame the decision.

The Tax Return Still Sees the Oil Money

Earnings-test treatment and income-tax treatment are separate questions. Oil-and-gas royalties are generally taxable as ordinary income. They can also affect whether part of a retiree's Social Security becomes federally taxable.

For a single filer, combined income above $25,000 can begin pulling benefits into taxable income; above $34,000, up to 85% of benefits can be taxable. The comparable thresholds for married couples filing jointly are $32,000 and $44,000. That does not mean 85% of the benefit is lost to tax. It means up to 85% can be included in taxable income and taxed at the household's applicable rate. A royalty-heavy year can also affect the timing of IRA withdrawals or Roth conversions. For someone who is 63 in 2026, required minimum distributions generally do not begin until 75.

Oil Check

Before filing for Social Security, pin down what the mineral interest actually is.

1. Confirm whether the payment is a royalty or an operating interest. The lease, division order and tax reporting should help establish which side of the line the income falls on.

2. Separate the earnings test from the tax bill. A royalty payment can be taxable without becoming wages or net self-employment earnings.

3. Run the tax projection with Social Security included. Avoiding the earnings test does not make the royalty income disappear from the federal return.

ConocoPhillips can sell the acreage and another operator can drill the wells. For the retired mineral owner, owning the oil is not the same thing as working the oil.

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If you've saved over $1,000,000, this guide is for you. The last thing you want in retirement is to run out of money, you want your money to generate lasting income while you enjoy your life.

Now you can learn the strategies wealthy retirees use to fund their retirement with The Definitive Guide to Retirement Income from Fisher Investments. Download the guide today! (sponsor)

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