FourPoint Gas Royalty Nonpayment and Late Payment Oklahoma Class Action

This class action concerns the nonpayment and late payment of oil and gas royalties. The complaint alleges that FourPoint Energy, LLC uses improper accounting methods, including taking improper deductions, that it does not account for or pay all royalties from wells, and that it does not pay the required interest when it makes late payments. 

The complaint refers to an “implied Marketable Condition Rule (MCR), which requires FourPoint to sever the gas from the ground and to prepare the gas for market at FourPoint’s sole expense.” After the gas is in marketable condition, royalty owners may have to pay their share of additional processing to achieve a higher-quality product.

When gas is taken from the ground, it is a mixture containing helium, nitrogen, NGLs, and other substances. It is dehydrated and compressed, then sent through underground gathering lines to processing plants. At the processing plants, the raw gas is turned into two products, methane and fractionated natural gas liquids (NGLs). These are the products sold on the commercial markets. 

The processing plants remove impurities in the gas, then process the remainder into methane, NGLs, and (in the Panhandle of Oklahoma) crude helium. The complaint claims that none of these are in commercially-marketable state when they emerge from the processing plant. 

The methane must be pressurized to enter the transmission line. The NGLs must also be separated and processed into individual saleable products, such as ethane, propane, and butane. Helium must be processed into Grade A helium.

The complaint alleges that FourPoint improperly deducts fees for this final processing, including fees for such things as transportation and fractionation that are required to make the NGLs marketable. According to the complaint, FourPoint also passes off sham sales as commercial market sales in order to use them as a basis for royalty payments.

Also, the complaint alleges that in various areas where additional substances are taken along with the gas (such as helium in this area), royalty owners are paid little or nothing for it. 

Finally, the complaint alleges that when FourPoint makes its royalty payments late, it does not add the interest required by Oklahoma law.

Two classes have been defined for this action.

• The Royalty Deductions Class is all royalty owners in Oklahoma wells where FourPoint (and its affiliated predecessors and successors) are or was the operator (or a working interest owner who marketed its share of gas and directly paid royalties to royalty owners. The claims of this class relate to royalty payments for gas and its constituents (including residue gas, natural gas liquids, helium, nitrogen, or drip condensate).
• The Late Payment Class is all persons or entities who received untimely payments from FourPoint (or FourPoint’s designee) for oil and gas proceeds from Oklahoma wells and whose payments did not include statutory interest.

There is also a Royalty Deductions Subclass.

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