SHERIDAN — A natural gas company operating in Sheridan County is the defendant in a class action lawsuit alleging the company is not paying out a fair share of mineral royalties to Sheridan County residents.
Austin Holdings, LLC, filed the lawsuit on behalf of itself and other present and past royalty owners against the Fidelity Exploration and Production Company, which is based in Delaware.
The complaint, filed in 4th Judicial District Court May 15, accuses Fidelity of improperly deducting costs of gathering, non-market pipeline transportation, compression and other charges from money owed to royalty owners. The document also purports proceeds from the production and sale of coal bed methane were incorrectly reported.
The lawsuit states that from the start of production from Fidelity wells, the company deducted fees for gathering and compression of natural gas on two pipelines that transport natural gas from the Powder River Basin through Sheridan and Campbell counties.
According to the document, the same deductions were taken out of royalties owed to Fidelity by Prarielands Energy Marketing, Inc., an affiliate. Fidelity deducted the same gathering costs from the plaintiff that PEMI had deducted from Fidelity’s royalties, though they were not legally entitled to do so.
Attorney Nicholas Murdoch said the amount potentially owed to royalty owners is not determined at this point, but if the suit is successful, hundreds of people in Sheridan County could be owed 10 years’ worth of overdue royalties and interest.
Tim Rasmussen, spokesperson for Fidelity, said the company denies any wrongdoing.
“We believe the deductions from the royalty payments were permissible under the law,” Rasmussen said. “We intend to vigorously defend this position.”
Fiedlity has filed a motion to have the charges dismissed.