Plaintiff Kyle Alan Taylor leases gas wells on his Oklahoma land to Sheridan Production Company. According to the complaint for this class action, Sheridan is underpaying him. Taylor questions the volume, price, deductions, and value of the gas and other products from the wells.
The class for this action is all royalty owners of Sheridan Production Company, LLC, from Oklahoma wells operated (or marketed and directly paid to royalty owners) by Sheridan that have produced gas from September 1, 2007 to the time class notice is given. Excluded from the class are (1) the Office of Natural Resources Revenue; (2) Sheridan and its employees, officers, and directors; and (3) any NYSE- or NASDAQ-listed company or its subsidiaries engaged in oil and gas exploration, gathering, processing, or marketing.
The wells at issue in this class action are subject to accounting methods and product laws that require that the lessee bear the costs of putting the products from the wells into marketable condition. According to the complaint, only after the products are marketable does a royalty owner have to pay a share of costs to get a higher price for the product, and the burden of proof for those costs is on the lessee.
The complaint goes into detail about the processing of the gas and other products from the wells, from the ground through on-site equipment, into tanks, and finally to a processing plant. The products left at the “tailgate” of the processing plant are (1) crude helium, (2) residue (methane) gas, and (3) natural gas liquids (NGLs), none of which is in commercially marketable condition. Also in question is one more product, drip concentrate.
Helium. The crude helium (50-80% pure) at the tailgate must be processed into Grade A helium (99.9% pure). According to the complaint, Sheridan does not pay Taylor royalties on the helium taken from his land.
Residue gas. The residue gas at the tailgate must be pressurized to enter a transmission line. The complaint claims that the company makes improper deductions for processing and pays royalties on a smaller volume than is actually taken from the wells.
NGLs. The complaint says that these are also not commercially marketable at the tailgate and must be separated into different products, such as ethane, propane, butane, and natural gasoline. According to the complaint, Sheridan improperly deducts processing and other costs that are required to make the gas commercially marketable.
Drip condensate. According to the complaint, Sheridan should be paying royalties on drip condensate which falls out from cooling on the gathering line.
The complaint claims that Sheridan has violated the terms of the well lease and breached its fiduciary duty.
Article Type: LawsuitTopic: Royalties
Most Recent Case Event
Sheridan Production Gas Well Royalties Underpayment Complaint
January 10, 2018
Plaintiff Kyle Alan Taylor leases gas wells on his Oklahoma land to Sheridan Production Company. According to the complaint for this class action, Sheridan is underpaying him. Taylor questions the volume, price, deductions, and value of the gas and other products from the wells. At issue are amounts paid for helium, residue gas, natural gas liquids, and drip concentrate.
sheridan_production_royalty_complaint.pdfCase Event History
Sheridan Production Gas Well Royalties Underpayment Complaint
January 10, 2018
Plaintiff Kyle Alan Taylor leases gas wells on his Oklahoma land to Sheridan Production Company. According to the complaint for this class action, Sheridan is underpaying him. Taylor questions the volume, price, deductions, and value of the gas and other products from the wells. At issue are amounts paid for helium, residue gas, natural gas liquids, and drip concentrate.
sheridan_production_royalty_complaint.pdf