A federal judge in the Western District of Pennsylvania has approved an estimated $22 million settlement in a case brought by landowners who claimed that Range Resources improperly deducted certain amounts from their royalty payments.
In Frederick v. Range Resources –Appalachia, LLC, No. 08-288 (W.D. Pa. March 17, 2011), plaintiffs initially challenged the legality of post-production cost deductions in calculating the royalty pursuant to the Pennsylvania Guaranteed Minimum Royalty Act (GMRA). While the suit was pending, the Pennsylvania Supreme Court decided that deducting post-production costs from gross sale proceeds before calculating the royalty did not violate the GMRA. Plaintiffs then amended their challenge to focus on the specific amounts, not the legality, of the post-production cost deductions. The parties agreed to a settlement, which the court approved, that consisted of two components: 1) an initial payment of $1,750,000, and 2) a cap on the future post-production deductions that can be deducted by Range Resources prior to the calculation of royalties. The parties estimated that the value of the cap on future post-production deductions was $20,343,648.
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