This Oklahoma case concerns the underpayment of royalties by Calyx Energy III, LLC on natural gas and its constituents taken from Oklahoma wells. The complaint alleges Calyx did this in two ways: by deducting certain postproduction fees it was not entitled to, and by not paying royalties on natural gas Calyx used or allowed third parties to use as fuel, for example, to power machinery for gathering systems or gas plant operations.
The class for this action is all persons or entities who are or were royalty owners for Oklahoma wells with Calyx Energy III is or was the operator and working interest owner (or for which, as non-operating working interest owner, Calyx Energy III separately marketed gas). The class does not include overriding royalty owners or other owners who derive their interest through the oil and gas lease.
Calyx operates wells and is a gas working interest owner for wells in Oklahoma. It takes natural gas out of the wells, processes it into a marketable form, sells it, and pays royalties to the owners of the lease.
Under Oklahoma law, the complaint alleges, “all royalties in a drilling and spacing unit are effectively pooled or ‘communitized’ so that all royalty owners receive a proportionate share of all revenue from all gas sold from the well.” Therefore, the complaint claims, the royalties on the sales of gas from the well are to be distributed among all royalty owner of the unit, “not just the royalty owners who have a direct lessor-lessee relationship with the working interest owner selling the gas.”
The well operator and party that sells the gas has access to information that royalty owners do not have, the complaint alleges, so that they must trust the well owner to provide truthful information.
The complaint alleges that Calyx deducted fees from the royalties it paid that it was not entitled to, that is, “fees for gathering, compressing, dehydrating, processing and/or marketing the gas…”
The complaint’s other allegation is “[b]ased on information and belief[.]” This is that “Calyx Energy also used, caused to be used and/or allowed third parties to use Fuel Gas—i.e., certain amounts of raw natural gas produced from the Oklahoma Wells off the leased premises as fuel to power various machinery and equipment, on gathering systems and/or at gas plants without paying royalty on such Fuel Gas.”
These fees, the complaint alleges, were improperly charged for midstream services that were meant to put the raw natural gas into a marketable condition. However, the complaint claims that the leases of the royalty owners in this case forbid Calyx from deducting costs paid to turn raw gas into marketable products. Calyx’s method of calculating royalties, the complaint claims, breaches the leases.
Article Type: LawsuitTopic: Royalties
Most Recent Case Event
Calyx Energy Underpayment of Royalties on Oklahoma Gas Leases Complaint
February 6, 2023
This Oklahoma case concerns the underpayment of royalties by Calyx Energy III, LLC on natural gas and its constituents taken from Oklahoma wells. The complaint alleges Calyx did this in two ways: by deducting certain postproduction fees it was not entitled to, and by not paying royalties on natural gas Calyx used or allowed third parties to use as fuel, for example, to power machinery for gathering systems or gas plant operations.
Calyx Energy Underpayment of Royalties on Oklahoma Gas Leases ComplaintCase Event History
Calyx Energy Underpayment of Royalties on Oklahoma Gas Leases Complaint
February 6, 2023
This Oklahoma case concerns the underpayment of royalties by Calyx Energy III, LLC on natural gas and its constituents taken from Oklahoma wells. The complaint alleges Calyx did this in two ways: by deducting certain postproduction fees it was not entitled to, and by not paying royalties on natural gas Calyx used or allowed third parties to use as fuel, for example, to power machinery for gathering systems or gas plant operations.
Calyx Energy Underpayment of Royalties on Oklahoma Gas Leases Complaint