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Small Oil/NatGas Producers Sue Dominion Over Appalachian Gateway Contracts

More than 30 small oil and natural gas producers have filed a lawsuit against Dominion Transmission Inc. (DTI) and affiliates in West Virginia, claiming that the companies breached their fiduciary duties by forcing the producers into unprecedented long-term, fixed-fee contracts for a pipeline project completed years ago.

Most of the 37 plaintiffs are headquartered in West Virginia, but others are from nearby states, according to the lawsuit filed in the Marshall County Circuit Court. The companies accuse DTI, Dominion Resources Inc. and Dominion Field Services Inc. of deceiving them and forcing them to sign contracts for the Appalachian Gateway Project, which was placed into service in 2012 (see Shale DailySept. 4, 2012).

The companies claim that Dominion and unrelated parties set unreasonably short deadlines to sign up for capacity on Gateway.

The plaintiffs claim their contracts helped Dominion fund the project, which moves natural gas from West Virginia to storage fields in Pennsylvania for sale to customers in the Northeast and the Mid-Atlantic. Dominion built compressor stations, upgraded others and added about 110 miles of pipeline to expand its system.

The lawsuit, which seeks compensatory and punitive damages, claims that the 10-year agreements are unprecedented for smaller producers. Companies listed as plaintiffs include Tapo Energy LLC, Buckeye Oil Producing Co., DC Petroleum Inc., Horizon Energy Corp. and Energy Management Inc.

Dominion responded and said the lawsuit is "without merit" and that it would "vigorously" defend against the claims.

"Dominion expects its contractual counterparties to honor their contractual obligations, instead of trying to find ways to hold Dominion responsible for the drop in natural gas prices," spokesman Robert Fulton said.

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