In 2008, Pennsylvania landowners filed lawsuits to have their lease agreements, signed in 2007 with Range Resources, invalidated because the royalty payments they were receiving fell below the 12 1/2 percent level that is guaranteed under PA’s Guaranteed Minimum Royalty Act (GMRA). The landowners separately were joined together into a class action lawsuit representing some 25,000 landowners. The case became known as Frederick v. Range Resources. The landowners challenged the method of calculating royalties that deducts expenses after the gas leaves the wellhead (processing, delivery, other fees). Their argument was that said fees should come from the driller’s side of the ledger sheet and not the landowner.
The original lawsuit was withdrawn when the PA Supreme Court, in 2010, ruled that deducting fees does not violate the GMRA. So the lawyer for the landowners took a different approach.
Specifically, the plaintiffs claimed that Range Resources had improperly reduced the amounts of their royalty payments by wrongly using the point-of-sale volume of gas, rather than the volume of gas collected at the wellhead, to calculate the gross royalty.
The suit also challenged deductions for marketing costs and management fees, as well as the lack of royalties for liquid hydrocarbons, a product extracted from the gas and sold separately by Range Resources.*
This time landowners had a stronger case, and it was just announced that Range has settled. The value of the settlement will be about $22 million over the next five years, with the attorney receiving 25% of that total.
*Pittsburgh Post-Gazette (Mar 23, 2011) – Judge OKs $22 million Marcellus Shale case settlement