A U.S. District Court in Akron recently decided Ohio law allows energy companies to deduct fees from payments to royalty holders whose contracts set a value at the well site, according to Reuters. The ruling settled a widely-followed case involving Chesapeake Energy Corp and defined what Ohio law means when it says the value of energy in such contracts is established at the well.
In 2009, Regis Lutz and other royalty holders sued Chesapeake, Columbia Energy Group Inc. and NiSource, alleging breach of contract and fraud due to deductions for services that occurred after the fuel left the wells on their properties. Their contracts specified royalties would be paid based on a percentage of value at the well, and plaintiffs claimed energy companies took improper deductions for processing and marketing — costs that were incurred far from the well.
The case will continue for a group of royalty owners whose contracts did not use the same “at the well” language.