Natural gas—producers: Jurisdictions vary greatly on when natural gas becomes marketable

Abstract

In recent years, natural gas producers throughout the United States have been subjected to lawsuits by royalty and overriding royalty owners asserting that producers have underpaid them royalty by deducting from royalty payments their share of costs associated with postproduction services (i.e., gathering, dehydrating, treating/processing, and compressing gas between the wellhead and plant tailgates). Such claims are generically referenced as assertions for application of the so-called marketable condition rule.