SALEM, Ohio — A federal lawsuit claims Encino Energy and its affiliates underpaid Ohio landowners at least $5 million for oil and natural gas royalties.
The proposed class action lawsuit was filed in U.S. District Court for the Northern District of Ohio on Oct. 18 by attorneys representing landowners in Columbiana and Carroll counties.
The Zehentbauer family and Hanover Farms, in Columbiana County, and Evelyn Frances Young, in Carroll County, are the named plaintiffs in the suit, although there are 140 landowners represented in the class.
Encino Energy, Encino Acquisition Partner Holdings, EAP Operating and EAP Ohio are the defendants. The case was assigned to Judge Benita Y. Pearson in Youngstown.
Jackie Stewart, Encino spokeswoman, said in a statement that the disputed leases did not originate with Encino, but were acquired from another operator.
“These leases contain provisions that have been under review by Ohio federal courts for a significant amount of time prior to our arrival in Ohio,” Stewart said. “We are awaiting the courts’ ruling on these provisions before these matters can be clearly resolved.”
Houston-based Encino Acquisition Partners bought all of Chesapeake Energy Corp.’s Ohio Utica Shale assets for $2 billion in October 2018, which included 320,000 net acres and 920 operated and non-operated wells.
Zehentbauer leased 656 acres and 296 acres with Ohio Buckeye Energy, which later merged with Chesapeake. Young leased 166 acres with Chesapeake.
The Zehentbauer family is involved in a similar case in federal court filed against Chesapeake, regarding the same issues raised in this case.
Canton-based law firm, Krugliak, Wilkins, Griffiths & Dougherty, and Sandusky law firm, Murray and Murray, are representing the plaintiffs.
The suit alleges that Encino has been taking out a number of improper post-production deductions from the landowner’s royalty checks. Since Encino took over the Chesapeake leases in late October 2018, there have been deductions for things like gathering, processing, dehydrating, transporting and compression, according to the lawsuit.
Bill Williams, chair of Krugliak law firm’s oil and gas section, said the plaintiffs’ lease agreements don’t allow for post-production deductions.
Only government-imposed taxes and fees could be deducted from the royalty checks, according to the leases.
The deductions were significant — between 50 to 90% for the majority of people, Williams said.
There had been similar issues with Chesapeake, and many landowners were hopeful that things could change for the better once Encino took over, Williams said.
“It’s far worse than how it was with Chesapeake,” he said.
Stewart said the changes landowners have seen in their royalty payments are due to lower commodity prices and an increase in transparency on Encino’s part.
She said in the last year, natural gas prices were down about 20%, ethane prices were down 48% and propane prices were down about 45%.
“When either or both happen, royalty payments decrease, sometimes dramatically,” she said in a statement.
Additionally, Encino adopted “greater royalty check transparency,” Stewart said. The company is sharing detailed information about how royalty payments are calculated.
If anyone has questions about their lease or how checks are calculated, Stewart said they should contact the company at 866-678-0551.
(Reporter Rachel Wagoner can be contacted at 800-837-3419 or firstname.lastname@example.org.)
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