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Oklahoma Court OKs $80M Natural Gas Royalties Settlement Between XTO, Landowners

An Oklahoma judge on Tuesday approved a settlement by ExxonMobil Corp.’s XTO Energy Inc. that requires $80 million to be paid in a class action lawsuit regarding underpaid natural gas royalties.

U.S. Magistrate Kimberly E. Ward also approved a payment of up to $32 million to the group’s attorneys in Chieftain Royalty Co. v XTO Energy Inc., No. 6:11-CV-00029-KEW. More than 22,000 potential class members initially were identified by the settlement administrator.

Chieftain Royalty Co. filed a lawsuit against the defendant in December 2010 claiming royalties were underpaid for gas produced in Oklahoma wells from May 2002 through May 2017.

ExxonMobil completed its takeover of XTO, which now oversees its onshore development, in June 2010. Some alleged underpayments by predecessor companies already have been settled. 

According to the lawsuit, royalties were underpaid on gas and its constituents, including helium, residue gas, natural gas liquids, nitrogen and condensate. The lawsuit claimed that the defendant:

  • Made various deductions and reductions from royalty payments that should not have been made by deducting direct and indirect fees for marketing, gathering, transporting, compression, dehydration, processing, treatment, and other similar services before the gas and its constituents was a “marketable product”;
  • Did not pay royalty on gas that was used off the lease premises or in the manufacture of products;
  • Did not pay royalty on drip condensate that dropped out of the gas stream; and
  • Failed to provide to royalty payees all of the information required by statute.

The preliminary settlement was approved by the court in mid-January. No objections had been filed regarding the settlement as of the March 8 deadline, the court noted.

Although it agreed to the settlement, XTO did not admit to any wrongdoing or liability.

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