Colorado couple claims ExxonMobil underpaying gas royalties

By Kelly Holleran | Feb 7, 2012

A Colorado couple is claiming that ExxonMobil is paying them unreasonably low prices for carbon dioxide retrieved from their property, recent court documents state.

Celeste C. Grynberg and Jack J. Grynberg filed a lawsuit Jan. 27 in Jefferson County District Court against Mobil Cortez Pipeline, ExxonMobil Oil Corp., Mobil Producing Texas and New Mexico and unspecified people identified only as John Does 1-10.

Celeste Grynberg is also representing plaintiffs The Rachel Susan Trust, The Stephen Mark Trust and The Miriam Zela Trust.

In their complaint, the plaintiffs claim they allowed Shell and Mobil to operate the McElmo Dome Unit on their 13,500 acres of property in Montezuma County in Colorado.

Shell and Mobil have been able to obtain carbon dioxide from the unit, but have consistently been paying the Grynbergs unfair royalties for the natural resource, allowing the companies to make excessive profits, according to the complaint.

"Shell and Mobil were paying much lower prices for carbon dioxide produced from the McElmo Dome Unit than are routinely being charged by sellers of carbon dioxide elsewhere in the country, including another producer and seller of carbon dioxide gas from the McElmo Dome outside the unit," the suit states.

"If the carbon dioxide were appropriately priced at fair market value, then Shell and Mobil would have to pay substantially more in royalties to the Grynbergs among others; by keeping the price artificially low, Shell and Mobil can avoid these royalty expenses as well as Colorado, conservation and severance taxes."

In addition to paying lower prices for the carbon dioxide, the defending companies were also charging unreasonable high prices to transport the natural resource along a pipeline from Colorado to west Texas, the complaint says.

Such a practice impacted the Grynbergs because any transportation costs are subtracted from the amount of money they make in royalty payments. And because the defending companies own the pipeline used to transport the gas, the companies were profiting from the deal, the Grynbergs claim.

The Grynbergs filed a lawsuit against Shell for the alleged infractions in 1998 and were awarded "a seven-figure settlement" in August 2006, according to their current complaint.

However, the settlement did not set future pricing, and the defendant companies continued to pay unreasonably low prices, the suit states.

"Based on his investigation, Mr. Grynberg believes the price being collected for CO2 should be 4-5 times higher," the complaint says. "An artificially set oil price of $0.9752 to $1.1830 per 1,000 cubic feet represents a peanut of the price of CO2 natural gas, and thus, constitutes theft. The fair market price should be anywhere from $5 to $10 per MCF at the well head."

In their complaint, the Grynbergs allege conspiracy, breach of fiduciary duty and common law fraud against the defendants.

They seek unspecified compensatory, exemplary and treble damages, plus pre-judgment interest and an assignment of prorata ownership in oil production.

Kip Kevin Lamb and K. Leigh Parker Jr. of Lamb Law Firm in Beaumont and James W. Mehaffy of Beaumont will be representing them.

Judge Donald Floyd, 172nd District Court, has been assigned to the case.

Case No. E191-831

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