EXHIBIT 1 EXHIBIT 2 DISTRICT COURT, GARFIELD COUNTY, COLORADO 109 8th Street, Suite 104 DATE FILED: April 4, 2017 3:34 PM Glenwood Springs, CO 81601 FILING ID: BBB3645CE6EF7 ________________________________________________ CASE NUMBER: 2017CV30071 Plaintiff: RICHARD N. CASEY, v. Defendants: ANTERO RESOURCES CORPORATION AND URSA OPERATING COMPANY, LLC. ________________________________________________ Attorneys for Plaintiff Richard N. Casey Stacy A. Burrows, Co. Bar No. 49199 George A. Barton, Mo. Bar No. 26249 Law Offices of George A. Barton, P.C. 7227 Metcalf Ave., Suite 301 Overland Park, KS 66204 Phone: (816) 300-6250 Fax: (816) 300-6259 ▲ COURT USE ONLY ▲ Email: [email protected] [email protected] Case Number: Michael Sawyer, Co. Bar No. 32313 Karp Neu Hanlon, P.C. P.O. Drawer 2030 Div./Ctrm: Glenwood Springs, CO 81602 Phone: (970) 945-2261 Fax: (970) 945-7336 Email: [email protected] COMPLAINT AND DEMAND FOR JURY TRIAL Plaintiff Richard N. Casey (“Casey”), for his Complaint against Defendants Antero Resources Corporation (“Antero”) and URSA Operating Company, LLC (“URSA”), states: PARTIES, JURISDICTION, AND VENUE 1. Casey is a citizen of the State of Colorado, residing at 1251 W. 3rd St., Rifle, Colorado 81650. Casey has had the right to be paid royalties payable to the Lessor under the 2005 Lease Agreement referenced herein. 2. Defendant Antero is a Delaware corporation, with its principal place of business located at 1615 Wynkoop Street, Denver, Colorado 80202. 3. Defendant URSA is a Delaware limited liability company, with its principal place of business located at 1050 17th Street, Suite 2400, Denver, Colorado 80265. 4. This Court has subject matter jurisdiction over this action pursuant to Article VI, section 9 of the Colorado Constitution, which provides that the district courts shall have original jurisdiction in all civil, probate, and criminal cases. 5. This Court has personal jurisdiction over Antero and URSA pursuant to C.R.S. § 13-1-124(1), because Antero and URSA have conducted substantial business activities in the state of Colorado, and because the acts and conduct of Antero and URSA giving rise to the claims asserted in this Complaint occurred in the state of Colorado. 6. Pursuant to C.R.C.P. 98(a), venue is proper in this Court because this is an action against Defendants affecting real property mineral interests located in Garfield County, Colorado, and Garfield County, Colorado is the county in which the subject matter of this action, or a substantial part thereof, is situated. FACTUAL ALLEGATIONS 7. Casey claims that Antero and URSA have underpaid the royalties owed to Casey since April 8, 2005, on natural gas sales, including residue gas sales and natural gas liquid sales of ethane, propane, butane, isobutene, and pentane, which have been obtained from gas produced 2 from wells operated by Antero and/or URSA which are subject to the 2005 Lease Agreement referenced herein. 8. On April 8, 2005, Casey, as Lessor, entered into an Oil and Gas Lease with Antero Resources II Corporation, as Lessee (“the 2005 Lease Agreement”). Antero has assumed the rights and obligations of Antero Resources II Corporation under the 2005 Lease Agreement. Since that time, Casey has held all of the Lessor’s rights and interests under the 2005 Lease Agreement. 9. The applicable royalty provision of the 2005 Lease Agreement, at Paragraph 3, obligated Antero to pay Casey: [T]wenty percent (20%) of all gas and oil, including coal-bed methane gas, casinghead gas, hydrocarbons and other gas products or gaseous substances of whatever kind or nature, produced and saved from the Land, at the then prevailing market price for the product, whether or not such product is sold by the Lessee and whether sold at the wellhead, in the pipeline or otherwise, free of production cost, gathering costs, dehydration costs, compression costs, manufacturing costs, processing and treating costs, marketing costs, transportation cost and free of any and all other costs, except taxes and conservation charges assessable to the Lessor by law. 10. The term “market price,” as used in Paragraph 3 of the 2005 Lease Agreement, is defined to mean: The market price as stated above shall be either the fair and reasonable value thereof at the place where sold or used or the selling price if sold under bona fide contracts of sale with third persons, third persons being defined as any person or entity, not a subsidiary or affiliate of the Lessee, with whom Lessee deals with at arms’ length and with whom the Lessee has no processing contract involving production from the Land or other arrangement involving an exchange of production from the Land for other production, or any reciprocal allowance for discount on such production, or any reciprocal advantage, direct or indirect resulting from any contract or arrangement. Any sale of production pursuant to any contract, arrangement or other commitment existing as of the date of this Lease shall not be deemed a sale to third persons. 3 11. Antero produced natural gas from gas wells subject to the 2005 Lease Agreement at various times after April 8, 2005, through December of 2012, at which time Antero sold its rights, interests, and obligations under the 2005 Lease Agreement to URSA. URSA then began producing and selling natural gas from wells which are subject to the 2005 Lease Agreement. 12. The gas which Antero and URSA produced from the wells subject to the 2005 Lease Agreement at issue is commonly referred to as “wet gas,” because such gas, in addition to methane, consistently contains natural gas liquid hydrocarbon components, such as ethane, propane, butane, isobutane, and natural gasoline. Both Antero and URSA have performed periodic sample tests on such gas, which measures the percentage composition of the above-referenced natural gas liquid hydrocarbons, and which confirms that such natural gas liquid hydrocarbons are consistently part of the natural gas which is produced from the wells at issue. 13. The gas which Antero or URSA produced from wells subject to the 2005 Lease Agreement was, after it emerged from the well, transported to a gas processing plant, commonly referred to as the Meeker Gas Processing Plant (“the Meeker Plant”), for processing. At the Meeker Plant, the gas which came from Casey’s wells was processed, and the natural gas liquid components of the gas were extracted and separated from the gas which entered the Meeker Plant, resulting in a Y grade mix of natural gas liquids. In addition, after further treating, the gas was placed in a condition which satisfied the quality specifications of the long distance pipeline(s), where such gas, commonly referred to as residue gas, was sold by Antero or URSA to third persons at various delivery points along the long distance pipeline(s). 14. Under the terms of the 2005 Lease Agreement, Casey has had, and continues to have, the right to be paid royalties on all of the natural gas products which have been obtained from the gas which is produced from the wells subject to the 2005 Lease Agreement. 4 15. With respect to the residue gas which was obtained from the gas wells at issue, Antero and URSA breached their royalty payment obligations to Casey, as referenced above, by paying royalties to him based upon a dollar figure which was less than the selling price which Antero and URSA received on their sale of residue gas to third persons at the delivery points where such residue gas was sold to such third persons. Antero and URSA facilitated their royalty underpayments to Casey on the residue gas sales by deducting transportation costs, processing costs and other costs from the residue gas selling price to third persons in calculating royalties, in contradiction to the applicable royalty payment provisions of the 2005 Lease Agreement, which expressly prohibit such deductions. 16. With respect to the natural gas liquid components which came from the gas wells at issue, the Y grade mix of natural gas liquids which was extracted at the Meeker Plant was transported in a natural gas liquids pipeline to a fractionation facility in Texas or New Mexico, where the Y grade mix was fractionated into five natural gas liquid products – ethane, butane, isobutane, propane and natural gasoline – and where such natural gas liquid products were sold in bona fide contracts of sale with third persons. 17. Antero and URSA breached their royalty payment obligations to Casey, as set forth above, by failing to pay Casey royalties based on the sales price of the five natural gas liquid products to third persons, at the delivery points where such natural gas liquid products were sold to third persons. 18. Antero and URSA facilitated their underpayment of royalties to Casey on the natural gas liquid products by deducting transportation, processing, and treating costs for the selling price of such natural gas liquid products to third persons in their calculation and payment of royalties to Casey, which the 2005 Lease Agreement expressly prohibits, as referenced above. 5 19. Antero and URSA have further underpaid their royalty obligations to Casey by underpaying the amount of royalties owed to Casey on condensate which came from the wells subject to the 2005 Lease Agreement. 20. Antero and URSA have further underpaid their royalty obligations to Casey by taking excessive severance tax and ad valorem tax deductions in their calculation and payment of royalties paid to Casey under the 2005 Lease Agreement, including a monthly severance tax deduction which has consistently exceeded the one percent of proceeds for severance tax deductions, or “withholding,” which is permitted under Colorado statutory law. 21. Casey was a putative member of the Class in the class action case filed against Antero, which is captioned Alice Colton, et al.