Legal

Four Osages file new oil and gas mismanagement case in federal court

WASHINGTON — Claiming federal mismanagement of oil and gas royalties, a group of Osage shareholders has filed a proposed class-action lawsuit with the U.S. Court of Federal Claims.

On Aug. 21, four Osage shareholders, Tara Damron, William Fletcher, Richard Lonsinger and Kathryn Red Corn filed a four-count lawsuit with the U.S. Court of Federal Claims, seeking $100 million in damages from the federal government due to shoddy bookkeeping and management of the mineral estate’s royalty payments.

Specifically, the group is claiming that the federal government breached its trust responsibilities by overcharging shareholders for gross production tax payments to the state of Oklahoma, inaccurately reporting financial transfers involving headright funds and not providing regular accurate financial statements to headright owners.

According to the complaint, the federal government charged the maximum amount allowed for gross production tax on royalties, regardless of what the state’s actual rate was at the time.

Additionally, the management system used to oversee the Osage mineral estate, including headright payments, was the subject of a scathing October 2014 report from the Department of Interior’s Office of Inspector General that labeled the accounting procedures used as “fundamentally flawed.”

The financial records at the heart of the complaint were made available to the four plaintiffs by a previous class-action lawsuit brought forward by Osage shareholders.

Initially filed in 2002 as a voting rights case, Fletcher vs. United States alleged that the federal government mismanaged Osage headright owners’ oil and gas royalties and violated its trust responsibilities to those individuals by failing to account for its management of the Osage mineral estate, allowing headrights to be unlawfully transferred to non-Osages and by restricting participation in Osage elections to headright holders.

The case was granted class-action status in February 2014 and in 2015, the plaintiffs were granted a detailed, organized accounting of the Osages’ trust income.

In 2017, the 10th Circuit Court of Appeals upheld a ruling from the Northern District of Oklahoma that the approximately 5,000 plaintiffs were entitled to an accounting dating back to 2002, rather than 1972 as originally sought.