XTO Energy filed a motion Monday to dismiss a lawsuit filed against it over how it calculates royalty payments.

On July 14, the Thiele family and Richard Marburger as a trustee of the Olive M. Marburger living trust, both Butler County landowners, filed a suit against XTO in federal court alleging insufficient payment of royalties.

The complaint alleged that XTO had committed a breach of contract by deducting operating expenses from royalty payments to landowners.

The suit was filed by Pittsburgh-based firm Jones, Gregg, Creehan and Gerace, which hoped to have it continue as a class-action suit.

The plaintiffs would be any landowner who signed a mineral rights lease with Phillips Production before Phillips was acquired by Exxon Mobil in 2011. The leases stated that the landowners would receive one-eighth of the proceeds the company received for gas sales.

In its motion to dismiss, the legal counsel for XTO wrote that the company did not commit a breach of contract by deducting post-production costs. The court papers cited a 2010 court ruling that supported XTO’s method of determining royalties.

They cite legal precedent set by “Kilmer v. Elexco Land Services,” decided by Pennsylvania Supreme Court in 2010.

In that decision, the Pennsylvania Supreme Court held that the term “royalty” when used in oil and gas industry leases permits a “net-back method” of calculating royalties.

Under this method, “post production deductions may be taken from the value of the gas sold at the point of sale in order to obtain the value of the gas at the wellhead where it is produced,” according to the motion. Royalties are then calculated as a percentage of that net-back price.