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New Mexico Jury Awards Nearly $10M in BP Case

A jury in the federal District Court of New Mexico in Albuquerque last Wednesday awarded nearly $10 million to a group of San Juan Basin royalty owners against Houston-based BP America Production Co. The owners accused the BP unit of failing to pay adequate royalties.

A jury returned a verdict that included $9.74 million in compensatory damages. The original lawsuit also sought punitive damages, but U.S. Magistrate Judge Daniel Schneider dismissed that claim.

A BP spokesperson in Houston initially told the Associated Press (AP) that the company was "disappointed" and was studying the verdict and weighing its options in a case that was originally filed in 2009 by Albuquerque attorney Gene Gallegos. He alleged that BP was charging an undisclosed 25% processing fee, and the royalty owners contended that the producer was not entitled to deduct a processing fee before paying royalties, which are to be assessed on unprocessed gas supplies.

"We are disappointed by the jury's decision and have to evaluate what our next moves will be," said a Houston-based BP spokesperson. The federal district court in New Mexico did not respond to an NGI inquiry.

BP argued that the royalty owners' filing did not produce sufficient evidence to show why its royalty payments were inconsistent with the market value of the unprocessed gas at the wellhead.

Claims dating back to 2007 were focused on the gas supplies processed at the New Blanco plant where supplies from some 8,000 wells are processed. The supplies come from San Juan and Rio Arriba counties in northern New Mexico.

Royalty owners typically received monthly payments, ranging widely from $10 to several thousands of dollars. The plaintiffs said they average $100-200.

Gallegos told AP it is too early to estimate how much each royalty owner might get out of the verdict, but there are 4,000 members of the class action throughout the United States.

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