The court’s unanimous ruling last week was a setback for the State Land Office, which contended that producers have shortchanged New Mexico in what they pay for producing gas and oil on land owned by the state. The decision could affect several other pending royalty lawsuits potentially involving tens of millions of dollars.
Wally Drangmeister, a spokesman for the New Mexico Oil and Gas Association, said Monday the court’s ruling “reaffirms the common sense interpretation and application of lease provisions that the industry has employed for decades.”
One of the central issues is whether companies should be allowed to continue to deduct certain expenses for making natural gas marketable after it’s produced at well sites. Those so-called post-production costs include removing water and other impurities from the gas, and then transporting the gas to plants for additional processing before it’s shipped in pipelines for commercial distribution.
Royalties are paid on “net proceeds” and the Land Office sought to limit costs that can be deducted by producers. Some gas is produced from oil wells and the ruling also involves royalties paid on that. Read full story here: News New Mexico
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