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Natural Resources & Energy

Supreme Court: Company Still Liable For Wells It Sold

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Stephanie Joyce
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The Wyoming Supreme Court has decided an oil and gas company is liable for paying royalties and the costs of cleanup even though it sold its wells.

Pennaco Energy, a subsidiary of Marathon Oil, had sold its coal-bed methane wells in the Powder River Basin to High Plains Gas. High Plains subsequently went out of business without paying surface owners any royalties and without cleaning up the wells.

The surface owners sued Pennaco for damages, saying the agreements they signed did not release Pennaco from liability, even after it sold the wells. The Supreme Court agreed, saying that if the company had intended to be released from its obligations when it sold the wells, that should have been explicit in the contract.

Because the decision deals with specific surface use agreements, it’s not clear how or whether it will affect the thousands of other abandoned wells in the Powder River Basin, but it could.

In a statement, Marathon Oil said it is "disappointed with the ruling" and is "analyzing the decision and considering our next course of action." The Petroleum Association of Wyoming, which intervened in the lawsuit, declined to comment on the outcome. Other parties to the case could not be reached.

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