Weld County landowners claim Anadarko underpaid surface rights royalties for years

WELD COUNTY — A group of landowners in rural Weld County are suing Occidental Petroleum Corp. (NYSE: OXY) over what they claim was a multi-year effort by subsidiary Anadarko to reduce mineral-rights payments to royalty holders in Colorado, Wyoming and Utah.

In the suit, the group of plaintiffs claim that they and several other unidentified potential members of the lawsuit class own land along the “UP Strip”, or a swath of millions of acres across Northern Colorado, Wyoming and Utah that the federal government gave to Union Pacific during the 19th century as part of the construction of the transcontinental railroad.

The suit claims that Union Pacific retained the rights to the sub-surface minerals, but landowners on that strip have a right to 2.5% of the sales of any minerals sold under a surface owner agreement if they purchased their property before 2001.

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Union Pacific Resources Group Inc., the entity which held the railroad’s mineral rights, was acquired by Anadarko Petroleum Corp. in 2000. Nineteen years later, Occidental acquired Anadarko and its sizable Colorado assets for $55 billion.

Occidental is the largest energy operator in Weld County, producing 39.4 million barrels of oil and 282.98 million metric cubic feet last year. 

The second-largest, Noble Energy Inc. (Nasdaq: NBL), recently accepted a $5 billion acquisition offer by energy giant Chevron Corp. (NYSE: CVX).

In particular, the suit claims that Anadarko failed to pay the full amount to the surface-rights owners under agreements made between them and Union Pacific Resources Group Inc. beginning in 2010.

Anadarko allegedly started drilling more than 400 lateral wells beginning in “odd sections” of the platted land and extending them into the “even sections” rather than drilling straight down. The suit claims that this was an attempt to access the resources below without triggering royalties for the holders of about 75 surface owner agreements.

The plaintiffs are asking the court to establish a class for the lawsuit, and for Occidental to pay damages, interest and attorney’s fees to the landowners.

Barbara Frankland, an attorney at Denver-based Sharp Law LLP that is representing the class, said it’s unclear exactly how much Anadarko and Occidental allegedly withheld from payments because the case has yet to reach discovery. However, she said the amount is “significant.”

A spokeswoman for Occidental did not return a request for comment Monday.

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