Kansas Curbs Marketable Product Rule In O&G Royalty Cases

Law360, New York (July 13, 2015, 8:45 AM EDT) -- On July 3, 2015, the Kansas Supreme Court issued its long-awaited, unanimous decision in Fawcett v. Oil Producers Inc. of Kansas (“OPIK”), finding that the producer did not underpay royalties and rejecting the expansive application of the marketable product rule advanced by the class action plaintiffs. The court held that where an oil and gas producer sells natural gas at the wellhead to a gas gatherer under a “proceeds” lease providing for the payment of royalties based on sales “at the well,” the producer has satisfied its duty to make the gas marketable. This Kansas case may influence other states that...

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