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Mineral Rights Litigation Swells Across Country

by Elizabeth Alford on March 23, 2016

Two Texas companies squabble over Eagle Ford mineral leases as litigation swells throughout the oilpatch.

Related: Arkansas Mineral Owners Sue for Unlawful Royalty Deductions

In the major shale regions of the Bakken and Eagle Ford, litigation over mineral rights is booming as crude prices and rig counts have plummeted.  The courts are seeing everything from royalty, lease and title complaints to more complicated contract disputes involving major investors.

According to Fuelfix, “Last year brought a record-setting 9,305 civil cases to the district, including a 32 percent increase in small claims actions from the previous year. The number of civil cases in many of those counties are already on pace to equal last year’s stack.”

Last Wednesday, 1776 Energy Partners LLC sued Riley Exploration LLC for unspecified damages of more than $1 million, claiming they wrongfully let drilling leases expire after the company was hired to service 11,000 acres of oil and gas leases in Karnes County. 1776 is claiming breached their contract and asking for Riley to return all fees that have already been paid plus damages for the expired leases. According to records, Riley was paid a base monthly management fee of $75,000.

Another lawsuit involves a North Dakota couple who leased rights to water on their property to be used for fracking. As oil prices dropped, the couple are were left holding the bag for $180,000 for subcontractor fees, while $90,000 in royalty payments were never paid.

The stakes are high. With a bleak energy outlook and months of low prices, companies are struggling to stay afloat with little reserves to be patient.

“Companies that were once willing to let some time go on collecting accounts receivable for services are now filing well liens on a daily basis and trying to collect their money before the debtor goes insolvent,” Swanson said. “It’s all about everyone trying to get paid and working out deals to stay in operation.”

Cases involving mineral disputes are popping up all over the country:

  • PA: Last July, two landowners filed a lawsuit claiming XTO Energy improperly deducted operating expenses from royalty payments. The complaint indicated that there are potentially more than 100 plaintiffs that might be entitled to more than $5 million for the same scenario.
  • Several high profile lawsuits this year have involved the federal government as they have tried to cancel oil and gas lease when the driller hasn’t done anything wrong. In February, the U.S. Bureau of Land Management (BLM) announced that it is considering cancelling 25 oil and gas leases on the Thompson Divide, in Colorado.

  • TX: Chesapeake has been embroiled in a number of recent lawsuits where they are accused of cheating property owners out of royalty payments for their minerals. Hundreds of these cases are set to go to trial this spring in North Texas.
  • AK: Royalty owners in Faulkner, Conway and Van Buren counties AK are banding together to accuse several oil and gas operators of cheating them on their oil, gas and mineral interests. 88 defendants have filed suit against SouthWestern Energy Company, SWN Production LLC, SEECO Inc., DeSoto Gathering Company LLC and SWN Energy Services Company LLC.

 

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