6th Circuit Finds for Kentucky Oil and Gas Drillers in Dispute Over Royalties

CINCINNATI - The 6th Circuit Court of Appeals has affirmed a ruling in favor of leaseholders who were accused of improperly deducting post-production costs before paying royalties to landowners. Poplar Creek Development Co., et al. v. Chesapeake Appalachia LLC, Nos. 09-5914 and 10-5373 (6th Cir.).

The Circuit Court said in a Feb. 17 published opinion affirming decisions in two class actions that Kentucky follows an "at-the-well" rule that allows drillers to deduct production costs and taxes from the selling price before determining royalties for landowners.

Both cases at issue were brought by Kentucky landowners who complained that Chesapeake Appalachia LLC …