Class Action: SWN Production Company, StatOil USA Made Improper Deductions from Royalty Payments

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SWN Production Company and StatOil USA Onshore Properties, Inc. are facing a proposed class action lawsuit alleging the companies made unlawful deductions from royalty checks owed to the owners of wells from which the defendants extracted oil and gas. According to the complaint, West Virginia law dictates that lessees such as the defendants must “bear all costs incurred in exploring for, producing, marketing, and transporting” oil and gas “between the wellhead and the point of sale” unless otherwise specified in the lease agreement. The lawsuit argues that although the defendants’ leases do contain provisions holding the well owners responsible for some costs of production, the defendants have “create[d] ambiguity in the language of the lease agreement itself” and have failed to provide proof of the costs they supposedly incurred related to production.

The case argues that the production expenses deducted from the plaintiffs’ royalty payments were unlawful because the defendants’ lease agreements lacked clear language specifying which party is to bear which costs and the companies failed to provide clear and proper accounting of such expenses.

“There is no proof that any of the actual costs deducted by the operators have actually been incurred or that they are reasonable in any way. The burden is on the lessees to prove, by evidence of the type normally developed in legal proceedings requiring an accounting, that the lessees actually incurred such costs and that they were reasonable,” the complaint reads.