In the Summer and Fall of 2016, EQT drilled six Marcellus Shale wells on a well pad located on an adjacent farm. The horizontal lateral “legs” of those wells extended beneath the Richards property. “When we received the first royalty checks from the new horizontal wells in January, 2017, and I was shocked to see how much EQT had taken from us in the deductions,” stated Mr. Richards.
In addition to a sizeable increase in their royalty payments from the Marcellus Shale wells, the Richardses discovered something very troubling. In violation of the terms of the 1951 leases, EQT had taken large deductions from their gas royalty payments.
Those royalty deductions had been taken to offset the costs of the natural resources severance taxes which the State of West Virginia charged EQT as a producer of oil and gas on both the old vertical wells and the new horizontal shale wells. The corporation had also taken deductions to offset post-production costs on the horizontal shale wells for gathering and moving the natural gas to the interstate pipeline.
According to EQT, those costs were incurred among the several EQT subsidiary companies, and then “charged back” to the individual mineral owners in the form of a reduced price for the natural gas.
Testimony and documents presented at trial from EQT showed it took deductions for expenses from the time the “wet” shale gas left the wellhead near the community of Pullman until it entered the interstate pipeline. Those deductions included transportation to the MarkWest plant located thirty miles away in Doddridge County, where the natural gas liquids were separated from the methane.
According to the trial testimony, after Arnold Richards discovered the unauthorized deductions, he immediately called EQT and demanded a refund pursuant to the lease terms. “I didn’t get any satisfaction from EQT. They just gave me the runaround. That’s when I went to see my lawyers, Scott Windom and Rod Windom at Windom Law Offices,” he stated. “We filed suit just a month later, in February 2017.”
In the meantime EQT continued taking the unauthorized deductions from the Richardses’ royalty payments. By the time of trial, EQT had withheld $42,541 in severance taxes, and $191,999 in improper post-production costs from them.Read on by clicking here.
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