Hess Bakken Oil and Gas Royalties for North Dakota Leases Class Action

This class action concerns proper royalty payments for gas and oil leases in North Dakota for which Hess Bakken Investments II, LLC is the lessee. The plaintiff and lessor, Ronald Penman, entered into the lease with a different company in October 2009 and Hess took over as lessee in 2010. The complaint alleges that Hess has made improper deductions from the amount of oil owed, paid royalties late without adding the required late fee, and made improper deductions for post-production gas expenses.

First, under Penman’s lease, the complaint alleges, Hess is supposed to credit Penman with three-sixteenths (3/16) of the oil produced and saved from the leased land, deducting reasonable post-production costs. But the complaint alleges that Hess has deducted “unreasonable and excessive costs related to an assortment of mid-stream services” that Hess should be paying for.

Even worse, the complaint claims, some of these services have been provided by Hess companies, so that Hess keeps the money deducted and paid for them.

Second, North Dakota law requires that lessees pay royalties on oil or gas within 150 days of its marketing or pay 18% interest on the unpaid amount. Also, the owner of the royalties does not have to ask for the interest; the lessee must automatically add it into payments. The complaint alleges that Hess has paid royalties late, after the 150-day period, but has not added in the 18% late fee.

Finally, Penman’s lease requires a similar three-sixteenth (3/16) payment for gas from the wells covered by the lease, the complaint claims. However, according to the complaint, “Hess’s post-production costs for processing, compressing, and transporting the gas produced under wells subject to the Penman lease have resulted in a negative gas royalty.” The complaint claims that, since 2012, Hess has deducted the processing costs from Penman’s oil royalty.

The class for this action is composed of three subclasses:

• Subclass I: All persons to whom Hess has paid royalties on oil produced from wells in North Dakota since May 2012, under oil and gas leases which generally require the Lessee to deliver to the credit of the Lessor, free of cost, in the pipeline to which Lessee may connect wells on said land, the equal [a specified percentage] of all oil produced and saved from the leased premises.
• Subclass II: All non-excluded persons or entities owning mineral interests in North Dakota wells who (1) received late payments from Hess for royalties associated with oil and gas production from North Dakota wells at any time since June 1, 2016, and (2) whose payments did not include the 18% interest required by law.
• Subclass III: All persons to whom Hess paid or was obligated to pay royalties on oil or natural gas produced from wells in North Dakota since May 2012 under an oil and gas lease or overriding royalty agreement where Hess’s post-production expenses for gas were deducted from a royalty owner’s royalties.

Article Type: Lawsuit
Topic: Royalties
Tags: Improper Deductions, Late Fee, Royalties, Royalty Payments