Deductions could come via Supreme Court ruling
WHEELING — Those receiving royalty checks for Marcellus and Utica shale drilling in West Virginia could see their payments drop, pending a decision by the state’s Supreme Court of Appeals.
During a Wednesday meeting with mineral owners in Wheeling, West Virginia Royalty Owners Association Vice President Tom Huber shared a copy of a royalty statement from an operation in Pennsylvania that allowed the company to deduct “post-production expenses” from the mineral owner’s payment. In this particular instance, the expenses — $3,298.37 — were higher than the amount of royalties — $2,672.08 — due to the mineral owner, so the landowner actually owed money to the company.
The case Chief Justice Allen H. Loughry, along with Justices Robin Jean Davis, Margaret L. Workman, Menis E. Ketchum and Beth Walker, are scheduled to hear Tuesday could have a major impact on the finances of mineral owners who have leases with drilling companies.
“Any of you who have examples of post-production expenses know how it can eat up your royalties,” Tom Susman, organizer of the West Virginians for Property Rights group, said. “We’re pretty nervous about this.”
Because Marcellus and Utica shale natural gas often contains other substances — such as ethane, propane, butane and condensate — the gas stream must go through processing before it can go directly to market. These steps are considered post-production expenses.
According to Susman — and verified by court documents — the court voted 3-2 in November against allowing companies to take post-production expenses from royalty payments.
However, former Justice Brent Benjamin was one of those who voted in the majority, along with Davis and Workman.