On March 21, 2019, the Western District of Louisiana issued a summary judgment ruling in Allen Johnson, et al v. Chesapeake, determining that operators are not entitled to deduct “post-production” expenses from the share of proceeds attributable to unleased mineral owners in force-pooled units. Post-production expenses include charges relating to the gathering, compression, transporting, and treatment of natural gas. Chesapeake, and other operators, often pass these costs on to mineral owners who have not granted a mineral lease but whose land has been included in a larger production unit.
In its ruling, the court relied on the express wording of La. R.S. 30:10(A)(3). That provision states that operators must pay unleased owners in a unit their “pro rata share of the proceeds of the sale of production” from the unit. The court interpreted this clause based on its express language, noting that it could have been worded to explicitly authorize the deduction of post-production charges but was not. As a result, Chesapeake’s practice of taking these charges out of the amounts owed to unleased owners is unlawful. Chesapeake is expected to challenge the decision.
The attorneys of Davidson Summers, APLC briefed and argued the case, with the assistance of two other firms.