Natural Gas Producer, K.P. Kauffman Company, Inc., Wins First Royalty Case Under Rogers

DENVER (June 10, 2009) - On June 8, attorneys from Holland & Hart LLP obtained a verdict in favor of their client, K.P. Kauffman Company, Inc., in a class-action lawsuit tried in Denver District Court. The Class included 2,500 royalty owners alleging that Kauffman underpaid royalties on natural gas production. At trial, the Class demanded over $10.6 million in damages and increased royalties on future gas production. The jury rejected the Class’ claim, and found that Kauffman fulfilled its duty to market the natural gas by selling its gas at the wellhead.

The Class' allegations were based on the Colorado Supreme Court’s opinion in Rogers v. Westerman Farm Company, which dramatically altered state law on royalty calculation. Rogers held that, unless mineral leases expressly provide otherwise, producers are required to make natural gas fit for sale and deliver the gas to the first commercial market, free of cost to royalty owners. Since the Court issued its opinion in 2001, Rogers has generated an enormous amount of litigation, and natural gas companies defending against Rogers-type lawsuits have either settled or lost at trial. 

Relying on Rogers, the Class claimed Kauffman’s gas was not marketable until it was processed, and that royalties should have been paid on the residue gas and natural gas liquids. The jury disagreed, finding that Kauffman’s gas is marketable at the wellhead and, therefore, that Kauffman correctly paid its royalty owners. "We knew we had the facts, but the efforts of our counsel at Holland & Hart ensured that the facts spoke loud and clear: natural gas is marketable at the wellhead," said Kevin P. Kauffman, CEO, Chairman and President of K.P. Kauffman.

Kauffman was represented by Holland & Hart attorneys Tony Shaheen and Chris Chrisman.