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County joins gas royalty lawsuit against XTO Energy

The county has joined more than 100 other plaintiffs in a class-action lawsuit seeking more than $5 million in natural gas royalty payments from XTO Energy.

The county commissioners voted Wednesday to join the federal suit that claims Texas-based gas driller XTO subtracts excessive postproduction costs from the royalties owed to more than 100 plaintiffs and wrongfully charges certain royalty owners with postproduction costs incurred after the gas has been processed into a marketable form.

According to the suit, the charges imposed by XTO exceed $5 million.

The county joined the suit because it has a lease with XTO for land at the Sunnyview complex in Butler Township.

Solicitor Julie Graham said the county leased the land to XTO sometime before 2015 and retains the oil and gas rights.

If the plaintiffs prevail in the suit, the recovered fees would be placed in a common fund that would be used to pay their attorneys, Graham said. She estimated that a third of the amount recovered would go toward attorney fees.

The suit the county joined was filed in 2019 in U.S. District Court in Pittsburgh by D & Marburger Family Enterprises, Heasley’s Nurseries and Rodney and Bonita Lang, all of Butler County, and Roger and Sandra Salvatora of Mercer County. Each plaintiff owns property that they leased to XTO.

Marburger has about 155 acres in two lots in Forward Township under lease, Heasley’s has about 123 acres in six lots in Summit Township under lease, the Langs have about 48 acres in Jefferson Township under lease and the Salvatoras have about 158 acres in Summit Township under lease, according to the suit.

David Borkovic, the attorney the commissioners hired to represent the county in the suit, filed the 2019 suit on behalf of those four plaintiffs and represented two county landowners in a 2015 class action suit with similar allegations against XTO. That lawsuit was settled for $11 million in 2018.

The 2015 suit claimed XTO had committed a breach of contract by deducting operating expenses from royalty payments to landowners, leaving them with less than the one-eighth of the proceeds they were promised in the leases. It was filed on behalf of Thiele family of Jefferson Township and Richard Marburger as a trustee of the Olive M. Marburger living trust. Marburger’s claim involved 97.7 acres in Forward Township and the Thieles claim involved 148 acres in Jefferson Township.

One of the two lots D & Marburger Family Enterprises claim in the 2019 suit was involved in the 2015 suit.

The settlement of the 2015 suit is cited in arguments in the 2019 suit. The settlement said the class-action suit plaintiffs will pay proportionate shares of postproduction costs including all losses of produced volumes (whether by use as fuel, line loss, flaring, venting or otherwise); and all costs from and after the wellhead to the point of sale, including all gathering, dehydration, compression, treatment, processing, marketing and transportation costs.

According to the 2019 suit, Marburger, Heasleys, the Langs and the Salvatoras signed leases with Philips Production or Phillips Exploration between 2007 and 2011.

Phillips Production merged into Phillips Exploration in 2011. Phillips Exploration is now a wholly owned subsidiary of XTO and holds title to the plaintiffs’ oil and gas leases.

Phillips Production promised to pay Marburger a royalty equal to one-eighth of the total proceeds the company received for all gas sold under the lease, deducting only Marburger’s pro rated share of any severance or excise tax, according to the 2019 suit.

Phillips Exploration promised to pay the Salvatoras a royalty equal to 14% of the total proceeds, promised Heasley’s a 12.5% royalty and the Langs a 15% royalty, all with the same condition as with Marburger.

The 2019 suit does not say how much XTO paid the plaintiffs.

XTO could not be reached for comment.

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