Camino Natural Resources Late, Underpaid Royalties Class Action

This class action concerns royalties on the wells of Camino Natural Resources, LLC. The complaint alleges “knowing and willful underpayment or non-payment of royalties and oil-and-gas proceeds from wells through improper accounting methods…”

Two classes have been defined for this action.

• Class I is all royalty owners in Oklahoma wells where Camino (or its affiliated predecessors and successors) is the operator (or a working interest owner who marketed its share of gas and directly paid royalties to the owners) with claims relating to royalty payments for gas and its constituents.
• Class II is all persons or entities who (a) received untimely payments from Camino (or its designee) for proceeds from Oklahoma wells, and (b) whose payments did not include statutory interest.

Plaintiff Betty Jean Johnston Trust owns royalty interests in one Camino gas well for which it has a lease with Camino. 

Under Oklahoma law, the lessee—in this case, Camino—must bear all costs of turning gas and its constituents into “marketable condition” products that can be sold as is in the marketplace. The complaint says, “Only after a given product is marketable does a royalty owner have to pay its proportionate share of the reasonable costs to get a higher enhanced value or price for that particular product.”

The owner of the land and the producing company will have an agreement specifying the proportion of profits the owner is entitled to. However, the owner is at a disadvantage in that the producing company (or lessee) is in control of the accounting. The complaint says, “Camino, like most lessees, has guarded its production and accounting processes as confidential or proprietary, thereby[] depriving the royalty owners of information necessary to understand how Camino calculates royalties.”

Gas is gathered from wells, taken to processing plants through underground lines, and then turned into two main products: methane and fractionated natural gas liquids (NGLs). Impurities are then removed and they are turned into finished products and then sold on the commercial market. 

The complaint alleges that Camino improperly deducts fees for the processing and transportation of NGLs, and that if helium or other products are recovered along with the gas, Camino pays royalty owners “little or nothing” for them. 

Sometimes, the complaint alleges, the company also creates “sham sales” which result in lower royalty payments.

The complaint thus claims that Camino underpays royalty owners through various manipulations. However, Camino then compounds its wrongdoing by delaying payments to royalty owners, and doesn’t pay interest on the royalties to cover the delay. 

Article Type: Lawsuit
Topic: Royalties
Tags: Energy, Energy Exploration and Production, Royalty Payments