Owners of oil and gas leases are paid royalties on sales of the products taken out of their land. In this case, the complaint alleges that EQT Corporation violated the terms of leases by calculating royalties based on sales to its affiliated companies, rather than on sales at higher prices to unaffiliated companies.
The many individual plaintiffs in this case are part of a group called the Smith-Goshen Landowners Group of Belmont County, Ohio. The group, along with other landowners, entered into similar leases with a company called Rice Drilling D, LLC, a subsidiary of Rice Energy, Inc. These leases are referred to in the complaint as Smith-Goshen Leases.
In 2017, Rice Energy merged with EQT Corporation, with Rice Drilling D becoming a subsidiary of EQT. The defendants in this case are Rice Drilling D, EQT, and related EQT companies. After the merger, royalty statements for the leases began coming from EQT.
The leases contain a provision on royalty payments, which the complaint quotes as saying, “The Lessee shall pay to Lessor twenty percent (20%) of the gross proceeds received by Lessee from an unaffiliated third party purchaser in an arm[’]s length transaction at the point of sale for all of the Leased Products produced from each and every well on the Leased Premises…” The leases also contain a definition of an “affiliate.”
The complaint alleges that the defendants in this case “initially sell the Leased Products produced from the land … to an affiliate believed to be EQT Energy, LLC, and/or another affiliate…” That affiliate price, the complaint alleges, is used to calculate the royalties, after which the Leased Products are resold to unaffiliated third-party buyers at a higher price.
The complaint alleges that the price that should be used to calculate the royalties is the non-affiliate, higher price from the second sale.
According to the complaint similar lawsuits have been filed in West Virginia against EQT companies. It claims that EQT Corporation’s 2021 10-K admits that, in one of these cases, certain EQT companies were held to be alter egos of one another and that royalties should not have been based on sales to these companies but on sales to unaffiliated companies.
The class for this action is all persons or entities who own oil or gas mineral interests or royalty interests in Belmont County, Ohio that entered into, are parties to, or are beneficiaries of oil and gas leases with the defendants in this case, where the leases contain the royalty language contained in the Smith-Goshen leases requiring royalties to be paid on 20% of the gross proceeds received by the Lessee from an unaffiliated third party purchaser in an arm’s length transaction; and who have received payments from the defendants in this case which were based on the proceeds received in a sale to an affiliate rather than the gross proceeds received in a sale to an unaffiliated third party purchaser in an arm’s length transaction.
Article Type: LawsuitTopic: Royalties
Most Recent Case Event
EQT, Rice Drilling D Leases Royalty Calculation Complaint
July 26, 2021
Owners of oil and gas leases are paid royalties on sales of the products taken out of their land. In this case, the complaint alleges that EQT Corporation violated the terms of leases by calculating royalties based on sales to its affiliated companies, rather than on sales at higher prices to unaffiliated companies.
EQT, Rice Drilling D Leases Royalty Calculation ComplaintCase Event History
EQT, Rice Drilling D Leases Royalty Calculation Complaint
July 26, 2021
Owners of oil and gas leases are paid royalties on sales of the products taken out of their land. In this case, the complaint alleges that EQT Corporation violated the terms of leases by calculating royalties based on sales to its affiliated companies, rather than on sales at higher prices to unaffiliated companies.
EQT, Rice Drilling D Leases Royalty Calculation Complaint