Kentucky Supreme Court Rules Against Landowners in Royalty Dispute

court gavelThe Supreme Court of Kentucky has just ruled, in a pair of cases, that producers (i.e. drillers) CAN deduct post-production costs before calculating royalties to landowners. Once case involves landowners suing Magnum Hunter, the other involves landowners suing EQT, claiming (much like what has happened in Pennsylvania) that post-production costs mean they are getting less than one-eighth or 12.5% of the fair value of the gas as a royalty payment. The Supreme Court of Kentucky ruled the language in the leases is unambiguous as is the law–and that the lease allows for post-production expenses to be deducted. Here’s a summary from the legal beagles at Vorys…

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