Leggett v. EQT Production Co.

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Both the legislative intent and language utilized in W. Va. Code 22-6-8 permits allocation or deduction of reasonable post-production expenses actually incurred by the lessee of an oil and/or gas lease and, more specifically, permits use of the “net-back” or “work-back” method of royalty calculation. Here the Supreme Court answered certified questions presented by the United States District Court for the Northern District of West Virginia regarding whether the Supreme Court’s decision in Tawney v. Columbia Natural Resources, LLC, 633 S.E.2d 22 (2006), has any effect upon whether a lessee subject to section 22-6-8 may deduct post-production expenses from the lessor’s royalty. Upon rehearing, the court concluded that royalty payments pursuant to an oil or gas lease governed by the statute may be subject to pro-rata deduction or allocation of all reasonable post-production expenses incurred by the lessee, and therefore, an oil or gas lessee may utilize the “net-back” or “work-back” method to calculate royalties owed to a lessor pursuant to a lease governed by section 22-6-8(e). View "Leggett v. EQT Production Co." on Justia Law