Federal Court in PA Rules in Class Action on Post-Production Costs
On January 24, 2013, Judge Joy Flowers Conti of the Western District of Pennsylvania adopted an October 2012 Report and Recommendation by Magistrate Judge Robert Mitchell in the class action styled Pollock, et al. v. Energy Corporation of America, partially granting and partially denying a motion for summary judgment by Energy Corporation of America. In this case, a class of plaintiff landowners allege, among other things, that ECA improperly deducted post-production marketing costs from the plaintiffs’ royalties. Judge Conti’s Memorandum Order interprets the widely reported 2010 Pennsylvania Supreme Court decision Kilmer v. Elexco Land Services. In Kilmer, the Pennsylvania Supreme Court clarified the Pennsylvania Guaranteed Minimum Royalty Act, permitting operators to deduct post-production costs. Kilmer defined post-production costs as those “expenditures from when the gas exits the ground until it is sold.” Judge Conti held that that the “recital of post-production costs [in Kilmer] should not be interpreted as comprehensive and that deduction of marketing costs, generally, is not contrary to law.”