Corder v. Antero Res. Corp.
| Decision Date | 12 May 2021 |
| Docket Number | c/w 1:18CV34,c/w 1:18CV39,c/w 1:18CV36,c/w 1:18CV31,CIVIL ACTION NO. 1:18CV30,c/w 1:18CV33,c/w 1:18CV38,c/w 1:18CV37,c/w 1:18CV40,c/w 1:18CV32,c/w 1:18CV35 |
| Court | U.S. District Court — Northern District of West Virginia |
| Parties | GERALD W. CORDER, Plaintiff, v. ANTERO RESOURCES CORPORATION, Defendant. |
(Judge Keeley)
These consolidated cases involve claims for breach of contract related to royalty payments for natural gas interests. The plaintiffs, Gerald W. Corder, Marlyn Sigmon, Garnet Cottrill, Randall N. Corder, Janet C. Packard, Leroy Packard, Lorena Krafft, Cheryl Morris, Tracy Bridge, Angela Nicholson, Kevin McCall, and Brian McCall (collectively "the Plaintiffs"), own several mineral interests in Harrison County and Doddridge County, West Virginia which have been leased, assigned, or otherwise acquired by the defendant, Antero Resources Corporation ("Antero"). They contend that Antero has improperly deducted post-production costs from royalty payments due them under certain oil and gas leases ("the Leases") (Dkt. No. 240 at 35).1 Id. Antero denies these allegations (Dkt. No. 39).
Pending before the Court are the parties' cross-motions for summary judgment. As the Court turns to the issues raised in these motions, it is important to emphasize that, at its core, this case raises questions about whether the language of the parties' various leases is specific enough under West Virginia law to permit Antero to allocate a portion of the costs it incurs to manufacture natural gas and valuable natural gas liquids ("NGLs") to the Plaintiffs, or if Antero is solely responsible for bearing such costs. For the reasons that follow, the Court GRANTS IN PART the Plaintiffs' Motion for Summary Judgment (Dkt. No. 210), and DENIES Antero's Motion for Summary Judgment (Dkt. No. 207).
A. Factual History
The Plaintiffs and Antero are parties to several leases covering the following tracts of land, each of which contains a separate royalty provision (Dkt. No. 240 at 24-26).2
The lease covering this tract requires Antero "to pay one-eighth (1/8) of the value at the well of gas from each and every gas well from which is marketed and used off the premises" (Dkt. No. 240-3).
The lease covering this tract requires Antero "to pay one-eighth (1/8) of the value at the well of the gas from each and every well drilled on said premises, the product from which is marketed and used off the premises, said gas to be measured at a meter set on the farm" (Dkt. No. 240-4).
The lease covering this tract requires Antero to pay royalties for (Dkt. No. 240-5).
The lease covering this tract requires Antero to pay "$100 per year for each and every gas well obtained on the premises" (Dkt. No. 240-8).
Several of these Leases have been amended by a Confidential Settlement Agreement and Release of All Claims ("the Settlement Agreement"), which Antero and the plaintiffs, Gerald W. Corder, Randall N. Corder, Lorena Krafft, Cheryl Morris, Tracy Bridge, Angela Nicholson, Kevin McCall, and Brian McCall ("the SettlingPlaintiffs"),5 entered into in August 2015 (Dkt. Nos. 47 at 7-10; 50). The Settlement Agreement terminated a partition action filed by Antero against the Settling Plaintiffs in the Circuit Court of Harrison County, West Virginia.6 See Dkt. No. 50 at 1.
In addition to the tracts affected by the partition suit, the Settlement Agreement acknowledged that the Settling Plaintiffs owned interests in numerous other properties located throughout Harrison County. Id. at 2. Those properties were identified on a Master Property List ("MPL") attached to the Settlement Agreement. Id. Pursuant to the Settlement Agreement, the Settling Plaintiffs released all claims and potential claims against Antero relating in any way to the partition action, or to the properties listed on the MPL, that arose prior to the execution of the Settlement Agreement. Id. 2-3, 6-7.
Paragraph 14 of the Settlement Agreement provides:
Antero acknowledges that per the terms of said June 29, 1979 leases identified in the preceding two paragraphs, production royalties payable pursuant to said leases shall be deemed gross royalties and shall be calculated without regard to any postproduction or market enhancements costs claimed or incurred by Antero.
Paragraph 11 of the Settlement Agreement, however, required the Settling Plaintiffs to execute the same lease modifications for all of the properties identified on the MPL. Id. at 4. These included each of the Plaintiffs' properties at issue here, except for the 50-acre tract located in Doddridge County, West Virginia, identified in this case as Tract H (Dkt. Nos. 47 at n.7; 210-2). Accordingly, the lease modification, labeled "Exhibit D" to the Settlement Agreement, applies to the Settling Plaintiffs' leases related to Tracts A though G (hereinafter "Leases 2 through 8"), and its terms are relevant to the issues in dispute here. Id.
Included in the modification of these leases is a Market Enhancement (Gross Proceeds) Clause ("the Market Enhancement Clause") that provides as follows:
It is agreed between the Lessor and Lesee that notwithstanding any language herein to the contrary, all oil, gas or other proceeds accruing to the Lessor under this lease or by state law shall be without deduction, directly or indirectly, for the cost of producing, gathering, storing, separating, treating, dehydrating, compressing, processing, transporting, and marketing the oil, gas and other products produced hereunder to transform the product into marketable form; however, any such costs which result in enhancing the value of the marketable oil, gas or other products to receive a better price may be deducted from Lessor's share of production so long as they are based on Lessee's actual cost of such enhancements. However, in no event shall Lessorreceive a price that is less than, or more than, the price received by Lessee
Under the Leases, Antero produces natural gas from nine (9) wells located on the Plaintiffs' properties (Dkt. No. 180-2 at 5). After the minerals are drawn to the surface, they stream into a production unit where they are separated into oil, gas, and water. Id. at 3. Well meters gauge the volume and chemical composition of the gas stream before it enters gathering pipelines and is aggregated for delivery into larger pipelines (Dkt. Nos. 180-2 at 3; 210-4 at 3). The Plaintiffs' gas may flow into one of two larger pipelines, either (1) the ECT Bobcat pipeline, an interstate pipeline that transfers unprocessed gas to downstream markets, or (2) a pipeline that transfers unprocessed gas to the Sherwood Gas Processing Plant.8 Id.
Gas from the Plaintiffs' properties contains NGLs, which can be extracted from the gas (Dkt. No. 180-2 at 5-6). If Antero processes the Plaintiffs' gas, it is transported to the Sherwood Gas Processing Plant, where the NGLs are separated from the"residue gas"9 (Dkt. No. 180-2 at 9, 14; 210-4 at 4). The NGLs are then fractionated into individual products and sold on the market (Dkt. No. 180-2 at 6-7; 210-4 at 3-4).
The parties dispute whether the gas from the Plaintiffs' properties must be processed before it may enter an interstate pipeline and be transported to the point of sale. According to Antero, it may elect to sell the Plaintiffs' gas on the market in its raw form or to process the gas if the processed gas and by products would be more profitable (Dkt. No. 180-2 at 10). The Plaintiffs, however, deny that their gas can be sold in its raw form and contend it must be...
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