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Oil and gas royalty lawsuit could reach settlement

Pete Fowler
Post Independent Staff
Glenwood Springs, CO Colorado

GARFIELD COUNTY, Colorado ” A 2006 lawsuit accusing Williams Production RMT of skimping on oil and gas royalty payments to more than 500 individuals or groups in the county looks like it may soon reach a settlement, court records show.

The lawsuit, filed by Grand Junction attorney Nathan Keever on behalf of Ivo, Sidney and Ruth Lindauer and Diamond Minerals, LLC, sought to obtain class action status for over 500 people or groups in Garfield County who’ve received royalty payments from Williams. The Lindauers live in Parachute.

The legal complaint alleges Williams has not properly calculated royalty payments because it failed to fully account for proceeds that it received from the sale of gas and other products. In calculating royalty payments, Williams used a price lower than proceeds received from sale and lower than the actual value of gas, the complaint says. It adds that Williams excluded or undervalued proceeds from selling natural gas and excluded volumes of natural gas, hydrocarbons and other products.



Court documents show that the case went to mediation in April 2007 and discussions have been ongoing. A status conference was held Thursday during which the attorneys said they’ve settled all of the issues in the case but two. They were granted three weeks to see if they can settle them, and the parties agreed to certify the plaintiff class “just for the purpose of settlement,” court records state.

A legal assistant at the Dufford, Waldeck, Milburn and Krohn lawfirm said Keever, the plaintiff’s attorney, did not wish to comment now because the case is still unresolved. A Williams spokeswoman said in an e-mail that Williams is unable to comment at this time since the matter is still in litigation.



The complaint also alleges Williams charged the plaintiffs with improper expenses. It adds that Williams failed to refund amounts withheld from royalty payments to pay taxes to Garfield County.

The complaint says Williams “has underpaid royalties” and “committed statutory theft entitling plaintiff and the members of the plaintiff class to the greater of two hundred dollars or three times the amount of the actual damages” plus costs and attorneys fees.

It’s impossible to figure out how much was underpaid because Williams has all the relevant accounting information, the complaint says. It asks for a judgment against Williams and a monetary award to be determined by the proper records.

Disagreements over royalty payments have also played out in other court cases locally.

In 2005, Joan L. Savage, of Rifle, won a favorable Colorado Court of Appeals ruling in a similar claim against Williams. Savage believed the company was not paying the appropriate amount of royalties on 110 gas wells on land for which she held the mineral rights. The claim was originally filed in 1998 against Barrett Resources, which merged with Williams.

The Colorado Supreme Court refused to hear Williams’ appeal of the ruling because it felt the Court of Appeals decision was appropriate, said Mary Ellen Denomy, an accredited petroleum accountant.

William Clough ” a now deceased Garfield County rancher ” won a $4 million award from Williams in the Colorado Court of Appeals in 2004. He also believed the company hadn’t paid him agreed-upon amounts of royalties. Denomy said Clough’s wife used the money to start a scholarship program for students. The Genevieve Clough Fellowship Program awarded over $600,000 to 53 high-school graduates and GED recipients from western Garfield County schools this year.

Another similar class-action lawsuit against EnCana filed in Denver in 2005 has also been settled between the company and the parties that didn’t opt out of the legal claim, she added. Most of those people were not in Garfield County but on the Front Range.

Denomy said it’s common for oil and gas companies to try to find ways to shave money out of royalty payments.

“It really points to the fact that we need oversight,” she said of the court battles. “It’s almost the same battle cry that we’ve got for our financial institutes right now. We need oversight to make sure royalties are paid.”

Denomy said that no such oversight exists for private individuals receiving royalty payments, unless they take matters into their own hands and go to court. The Colorado Oil and Gas Conservation Commission has the power to oversee royalty payment issues involving private individuals but it hasn’t exercised that power, she added. Two COGCC representatives couldn’t be immediately reached late Friday afternoon.

Production companies traditionally pay 12.5 percent of the profits from a well to the mineral rights owner.

Contact Pete Fowler: 384-9121

pfowler@postindependent.com

Post Independent, Glenwood Springs Colorado CO


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