In state courts across America, oil and gas mineral owners owners continue to challenge whether it is permissible for operators to deduct “post-production expenses” from oil and/or gas royalty payments. These challenges are often filed as a class action lawsuit on behalf of the mineral owners in each particular state.
In November 2008, the state court in West Virginia ruled on behalf of the states more than 12,000 oil and gas mineral owners. The settlement led to operators making approximately $253 million in royalty adjustments, which were to be paid back to the class of oil and gas royalty owners.
The issue surrounding many of the post-production oil and gas royalty lawsuits is in interpreting what it means if a lease specifies, as is standard, that a royalty is to be paid on the value of gas “at the well” or “at the wellhead.”
Some operators argue that gas produced at the wellhead may not be in marketable condition, and that the expenses involved with processing the gas, gathering the gas, and transporting the gas through the system to get to the interstate pipeline is justified.
Obviously, many oil and gas royalty owners disagree.
Additional Resources
- To read more about the West Virginia settlement and other pending post-production lawsuits, please visit the following news website: The State Journal
- To contact an oil and gas royalties lawyer, please visit: Schmidt & Clark, LLP
- We also suggest to all mineral owners interested in the various aspects of leasing to buy an excellent book titled, “Look Before You Lease”. You can order a copy of this book by visiting The National Association of Royalty Owners (NARO) website’s online bookstore: http://www.naro-us.org
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