Tawney v. Columbia Natural Resources, L.L.C.
Supreme Court of Appeals of West Virginia
633 S.E.2d 22 (W. Va. 2006)
Garrison Tawney and other oil and gas lessors (plaintiffs) leased oil and gas to Columbia Natural Resources (CNR) (defendant). The plaintiffs all retained one-eighth royalty interests in their leases. CNR routinely deducted post-production costs from the plaintiffs’ royalties before making payment. These costs included (1) delivery from the wellhead to the point of sale, (2) processing, and (3) any losses due to leaks during delivery. The plaintiffs brought a class-action suit against CNR in the Circuit Court of Rowe County, seeking recovery of the deducted amounts. There were 2,258 leases at issue in the class action. Most of the leases stated that the royalty payment would be calculated “at the well,” “at the wellhead,” “net all costs beyond the wellhead,” or “less all taxes, assessments, and adjustments.” CNR filed a motion for summary judgment, arguing that these phrases clarified that the deduction of post-production costs was permissible. The circuit court certified to the Supreme Court of Appeals of West Virginia the question of whether the “at the well” and similar language was sufficient to permit a lessee to deduct post-production expenses from the lessor’s royalty.
Rule of Law
Holding and Reasoning (Maynard, J.)
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