Daily GPI / Regulatory

Federal Judge Considering Class Action in Virginia Royalty Cases

A federal judge is considering whether five separate cases against EQT Corp. and Consol Energy Corp. should proceed as class action lawsuits, a decision that could potentially add thousands of plaintiffs in Southwest Virginia to those who allege that the companies cheated them out of millions in royalty payments.

At issue is how the plaintiffs -- mostly small landowners who reside in Buchanan, Dickenson and surrounding counties in the Utica and Devonian shale plays -- can access nearly $30 million in gas royalties that have been deposited into an escrow account controlled by the Virginia Oil and Gas Board.

U.S. District Court Judge James P. Jones heard three hours of oral arguments for the five cases last Thursday. He said he would render a decision as soon as possible. According to reports, Jones voiced frustration over the impasse in the cases, which has lasted three years.

"Are we going to throw up our hands and say 'oh well, that's how the world works?' All these people don't get their money in escrow?" Jones asked attorneys during the proceedings. "I had hoped that in the three years this case has been going on there would be some attempt to settle the matter or the Virginia legislature would attempt to settle the matter."

The cases, which are all in U.S. District Court for the Western District of Virginia in Abingdon, are Adair v. EQT Corp. et al. (No. 1:10CV00037);Addison v. CNX Gas Co. LLC et al. (No. 1:10CV00065); Adkins v. EQT Production Co. (No. 1:10CV00041); Hale v. CNX Gas Co. LLC et al. (No. 1:10-CV00059); and Legard et al. v. EQT Corp. et al. (No. 1:10CV00031).

The landowners had sold their coal interests years ago, but not their coalbed methane (CBM) interests. The landowners allege that the companies violated Virginia's Gas and Oil Act of 1990 (see Daily GPIMarch 16, 2011July 12, 2010June 30, 2010June 21, 2010).

According to court documents, "in all five cases, the plaintiffs seek a full and accurate disclosure and accounting by the well operators of their handling and marketing of the CBM taken from their particular wells at issue, as well as an accounting of all CBM royalties owed to the plaintiffs and proposed class members. Also remaining in all five cases are claims for conversion."

EQT and Consol, CNX's parent company, say they have complied with Virginia law and that the landowners' cases are frivolous.

"Consol Energy does not oppose and has never opposed the release of the escrow funds to the rightful, lawful owner, as determined in accordance with the laws of the Commonwealth," Consol spokeswoman Lynn Seay told NGI's Shale Daily on Tuesday. "In fact, Consol Energy continues to support efforts to release those funds.

"The [Virginia] Gas and Oil Act requires Consol Energy and other CBM operators to put royalty payments into the escrow account when there is a conflict in ownership. Consol Energy has long maintained that it is important for the money held in the state escrow account to be distributed to its rightful owners."

In November 2010, Magistrate Judge Pamela Meade Sargent denied a motion by the companies to have the cases dismissed. In June 2013, Sargent recommended that four of the five cases be awarded class action status. Jones can accept her recommendation, go against it, or come up with an alternative.

Don Barrett of the Barrett Law Group in Lexington, MS, lead attorney for the plaintiffs, could not be reached for comment Tuesday. 

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