Any Twaney type lease updates?

The circuit judge in the famous/infamous Tawney decision ruled that flat rate leases were?? invalid or against public policy....not sure of the exact term. I would need to go back and read it for the exact ruling language. In any event, his decision was never appealed since the case was settled after his decision. There must be thousands of flat rate leases out there. We have a few which just have to pay us $50 per year per well. No royalties for production. Has anyone one heard of any class action or individual suit on this issue?

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Permalink Reply by Nancy Mosley on August 1, 2013 at 6:09am

I think these would need to be individual suits, maybe for the producer. I know that a state law in WV says that any future gas wells need to be royalty based. We have some old (very old) wells that had been flat rate, and the producer decided a few years ago to start paying royalty. That was a good thing for them, since the royalty is tiny, the flat rate would have been better! These payments are lumped with other wells operated by the same producer which never were flat rate and pay a little better.

I would be interested if anyone has more info on this. 

Permalink Reply by Tony Yurina on August 1, 2013 at 2:32pm

http://caselaw.findlaw.com/wv-supreme-court-of-appeals/1311629.html

The Tawney vs. CNR case was appealed to the West Virginia Supreme Court.  You can use the link to read the reviewing courts opinion.  The Plaintiffs prevailed at the reviewing court. 

The court ruled the lease language was ambiguous in regard to permitting post production costs to be deducted from royalty. Once ruled ambiguous, the court could then construct, which resulted favorably  for the Plaintiffs and against the Defendents. 

You can also research the official records and damages awarded, but what was hard to understand, in addition to damages the WV court levied some huge punitive damages against the Defendant, approximately $350 million, which was way over the top.  Ultimately , this and other factors resulted in two companies moving their HQ out of the state.    

Permalink Reply by Jim White on August 1, 2013 at 7:57pm

Tony

I was referring to the "Motion for summary judgment relating to flat rate leases" where I believe the circuit judge ruled that those leases were void and unenforceable due to public policy. I don't believe this was appealed and am not sure exactly why.

Permalink Reply by Jim White on August 1, 2013 at 8:12pm

Here is Judge Evans's ruling in case anyone is interested. This was just his ruling in the circuit court based on Plaintiff's Motion for Summary Judgment.

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