A $41.7 million settlement received preliminary approval in a class action lawsuit against TEP Rocky Mountain LLC, a subsidiary of Terra Energy Partners.

The lawsuit began with a complaint filed by local enterprise Jolley Potter Ranches Energy Co. LLC in 2019. It alleges that for almost a decade TEP underpaid mineral rights owners for natural gas and hydrocarbon gas liquids collected in the Piceance Basin in Garfield County from the Grand Valley Gathering System.

It states that TEP underpaid royalties from Aug. 1, 2011 through Dec. 31, 2020 by deducting unreasonable gathering, processing and transportation costs and/or paying below-market rates, according to court documents.  

Jolley Potter Ranches discovered the alleged underpayments through remittance statements, or documents recording proof of payment.

“It’s difficult to know exactly what the deductions are for, and it’s impossible to know how the price is calculated,” Attorney Nathan Keever, a Jolley Potter Ranches Class representative, said regarding the statements. “All you can do is see that they seem off — deductions seem high, the price seems low. So it takes, essentially, discovery, which occurs as part of the litigation process, to determine why are the deductions high, why is the price low?”

Jolley Potter Ranches Energy Co. filed the lawsuit as a class action to cover the cost of experts consulted during the trial, which adds up to around $400,000 in expenses, according to Keever.

The case now impacts about 1,600 mineral rights owners. 

“Settlements range all over the place, but most of them are under $100,000, and you can’t bring in significant litigation against an oil and gas operator for under $100,000 and come out ahead,” Keever said. “So that’s why class action is the ideal way to handle these matters.”

After six years of litigation, TEP agreed to settle and a preliminary proposed settlement of $41.7 million was approved on April 11 by U.S. Magistrate Judge N. Reid Neureiter. 

“We have taken depositions in Houston, Tulsa, Denver, and had built a pretty good record and block of evidence on our claims,” Keever said. “(TEP) was looking at having to pay back a substantial amount, plus the continuation of interest on the claim that was accruing every day.

“To get some resolution, I think that is what motivated them to say, yeah, we’ll come to the table and make a reasonable offer,” he added. 

A final fairness hearing will be held Aug. 1, 2025 at the United States District Court for the District of Colorado in Denver. 

If the settlement is approved, members of the Jolley Potter Ranches Class will receive an automatic distribution after attorney fees and other court-approved expenses are deducted. Gross settlements for class members range from $10 to over $8 million, according to the preliminary distribution schedule. 

Keever believes the settlement is reasonable, adding that Jolley Potter Ranches Energy Co. is satisfied with the terms.

“It’s a substantial settlement for the amount of deductions that were taken,” Keever said. “The settlement agreement breaks down specifically how much as a percentage they’re getting back for each of the claims and some of them are as much as 90% of what was improperly deducted, and all of the claims include 8% interest from the time of the deduction.”

It’s a typical underpayment of loyalties case, according to Keever, who added that “royalty owners just have to keep an eye on their remitting statements to try to determine if they’re getting paid appropriately.” 

Neither TEP Rocky Mountain LLC nor representative Chris Chrisman responded to the Post Independent’s request for comment by the time of publication.