Oil & Gas Royalty Underpayment Lawsuits — In an era of unprecedented profits within the oil and gas industry, the American royalty owner is still very much at risk of being unfairly compensated by the Operators and Producers who routinely fail to pay fair royalties. Sometimes Producers make underpayments to royalty owners simply because of the complexities involved in today’s oil and gas leases and related agreements. However, often Producers blatantly fail to pay fair royalties. In either case, the royalty owner has a legal claim for compensation. Producers have a responsibility to behave as a “reasonably prudent operator” under all circumstances. Unfortunately, it is often the case that the Producers fail to obey many express and implied covenants in their leases, operating agreements, and unit agreements, which may ultimately result in gross underpayments being made to the oil & gas royalty owner.
When producers fail to act as a “reasonably prudent operator,” the following catastrophic consequences may occur:
- ROYALTIES WORTH THOUSANDS OR MILLIONS OF DOLLARS GO UNPAID
- MINERAL ESTATES ARE DEPLETED, WASTED OR DESTROYED
- SURFACE ESTATES ARE DAMAGED OR POLLUTED BEYOND REMEDIATION
- INCESTUOUS MARKETING ARRANGEMENTS BURDEN MINERAL ESTATES FOR DECADES
GAS COMPANIES REPORTEDLY WITHHOLDING UP TO 90% OF ROYALTY PAYMENTS
Some landowners have reported that companies are withholding as much 90% of royalty payments for unspecified costs and “gathering” expenses. Gathering is the process by which natural gas from individual pipelines is mixed with that from other properties and companies. Other costs for which companies withhold or deduct payments include:
- TRANSPORTATION, INCLUDING ACROSS LAND NOT OWNED BY THE LEASEHOLDER
- NATURAL GAS PROCESSING
- UNSOLD FUEL
- FUEL USED TO POWER COMPANY EQUIPMENT, INCLUDING EQUIPMENT USED IN GAS EXTRACTION PROCESS
- GAS SOLD AT A REDUCED OR LOWER-THAN-MARKET-VALUE-RATE TO A COMPANY SUBSIDIARY
- IT HAS BEEN REPORTED THAT IN, SOME CASES, LANDOWNERS HAD ROYALTIES WITHHELD EVEN WHEN THEIR CONTRACTS SPECIFICALLY FORBADE THESE PRACTICES. LANDOWNERS MAY HAVE ALSO SIGNED LEASE AGREEMENTS WITHOUT FULLY UNDERSTANDING THE TERMS TO WHICH THEY WERE AGREEING – OR THEIR LEGAL RIGHTS
DO YOU HAVE QUESTIONS RELATED TO OIL & GAS ROYALTY?
At Fulmer Sill, we are proud to deliver high-quality assistance to all of our clients. Should you choose to seek our legal representation, we are confident that our experience and knowledge will produce a favorable outcome for you. If you or a loved one have been affected by a oil & gas royalty claim, we encourage you to consult with our team as soon as possible. All initial consultations are free, and we don’t charge any up-front fees for representation. Fulmer Sill handles all fees on a contingency basis, meaning that unless we’re successful, you don’t have to pay us. Please contact us at (405)510.0077 for a free consultation.