In Re: Appalachian Land Company v. Eqt Production Company

Summary

The Court held that, absent a statutory or contractual provision allocating the burden otherwise, a natural-gas producer is solely responsible for Kentucky's severance tax, and a lessee may not deduct any portion of that tax before calculating a royalty based on the gas's market price at the well. The Court reasoned that the statutory text imposes the tax on those engaged in severing or processing natural gas and excludes arm's-length royalty owners, while the lease contained no provision shifting the tax. Justice Venters concurred on the additional ground that the tax is not a post-extraction production cost, while Justice Abramson, dissenting, would have allowed deduction of the portion attributable to post-production processing.