A class-action lawsuit has been filed by Texas property owners alleging that Devon Energy used sham transactions to underpay natural gas royalties.
On January 6, class-action status was granted by U.S. District Judge Ed Kinkeade in Dallas, allowing the four individuals who brought the lawsuit to represent the interests of thousands of landowners. The judge found that there were common legal issues, that Devon Energy owed a common duty to the members of the class, and that a formula can determine the damages owed to each class member, if any.
The landowners claim that the production arm of Devon Energy sold the natural gas to an affiliate, Devon Gas Services, at a low well head price. Devon Gas Services then used its Bridgeport plant to process the gas and deduct a 17.5 percent processing fee from royalty checks, the lawsuit alleges.
The plaintiffs called the processing fee “unreasonable and lucrative” and stated that Devon calculates royalties based on the “artificial” price it received from its own affiliate rather than what it was paid by unaffiliated third parties. The lawsuit also claims that after the gas left the processing plant, Devon and its affiliates made a profit selling the residue gas to third parties, but did not pay royalty owners a share of those profits.