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Oil company wants royalties lawsuit moved to federal court

A Texas-based oil and gas company wants a state lawsuit alleging fraud and breached leases over Idaho natural gas royalties moved to federal court.

Alta Mesa submitted notice Thursday in U.S. District Court seeking to move the complaint filed last month by nine Idaho residents, citing that none of the companies named in the lawsuit are from the state, the Idaho Statesman reported .

Alta Mesa says the companies were organized under Texas or Delaware laws, and that none of the partners of the companies are Idaho residents. Federal law allows lawsuits filed in state court to be moved to federal court if the defendants are not residents of that state.

The company also contends that the amount sought by the plaintiffs exceeds $75,000, another requirement, though the initial lawsuit doesn’t specify an amount sought other than to note the “extraordinarily large dollars at stake.”

The lawsuit filed in May in Third District Court in southwestern Idaho says the company underpaid natural gas royalties to leaseholders by altering royalty accounting methods.

Alta Mesa, the lawsuit says, “manipulated royalty accounting methods by calculating royalty on a net price rather than a gross price, by taking midstream deductions from royalty that the oil and gas leases do not expressly authorize, by failing to account for and pay royalties on all products produced, used, or sold, and by engaging in transactions with affiliates which reduced royalty paid.”

In related action, an investigation by state officials into the company’s production reporting from nine natural gas and oil wells in southwestern Idaho found what state officials describe as reasonable variances.

The investigation going back to 2015 found the greatest discrepancy occurred at a well that is the focus of the lawsuit. The investigation found a 28% difference in a particular product called condensate produced at what is called the Kaufmann well.

The commissioners agreed that, based on the volumes produced at the wells, the variations discovered in the investigation were small.

Still, the 28% difference in the amount of condensate reported at the Kaufmann well could add up to a significant dollar amount, though how much isn’t clear.


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