The West Virginia Supreme Court has decided to reconsider its ruling that prohibits oil and natural gas producers from deducting post-production costs from royalty checks in the state.
The justices ruled 3-2 to withdraw their November opinion and rehear the case, which pitted a farm owner and other royalty interest owners against EQT Corp. The farm owner claimed EQT had been wrongly deducting expenses for years.
The high court’s decision could have a far-reaching impact on the industry, which in some cases deducts post-production expenses to cover marketing costs such as compression, dehydration and transmission, depending on their agreements with landowners.
Justice Brent Benjamin wrote the original opinion, but he has since left the court. Justice Elizabeth Walker, who replaced him, joined the majority in agreeing to rehear the case. Walker was elected in November, and while the state now conducts nonpartisan judicial elections, she had campaigned as a Republican in a past election for a seat on the court.
EQT filed a petition for rehearing in December, arguing that the high court misinterpreted state royalties laws, misapplied a previous state Supreme Court ruling on a similar case and exceeded the lower court's question.
The issue of post-production deductions has been controversial in Appalachia and elsewhere in recent years. The Pennsylvania attorney general's office filed a lawsuit in 2015 againstChesapeake Energy Corp. for deceptive business practices related to the deductions. That case is still in state court. And late last year, the Ohio Supreme Court ruled that landowners challenging post-production costs must have their cases heard by trial courts on an individual basis.