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West Virginia Files to Dismiss EQT Lawsuit on Flat-Rate Leases, Royalties

West Virginia has filed a motion to dismiss EQT Corp.’s federal lawsuit challenging the state’s flat-rate lease statute, arguing that the state can’t be coerced by the company to reverse its laws.

EQT filed the lawsuit earlier this year, claiming that the state’s flat-rate lease statute is unconstitutional. The complaint was filed after the legislature passed a bill prohibiting post-production expenses from being deducted from flat-rate royalties.

Flat-rate leases are often paid monthly, quarterly, or, in EQT’s case, annually. They are not tied to the volume of oil and gas produced or marketed. While flat-rate leases are uncommon, EQT said in its lawsuit it likely holds the largest number of them in the state, or about 1,700.

EQT argued that the law, and the legislation that would find it paying more to landowners, both violate contract and due process clauses of the U.S. Constitution. But in its motion to dismiss, the state argues that the 11th Amendment protects against EQT’s claims for damages.

The amendment protects states from being sued in federal court. In this case, the state argues that the amendment bars suits in federal courts for money damages against an unconsenting state.

Filed in the U.S. District Court for the Northern District of West Virginia, EQT has named West Virginia Department of Environmental Protection (WVDEP) Secretary Austin Caperton as the defendant because it is his responsibility to enforce the flat-rate statute. The 11th amendment, Caperton’s lawyers argue in the motion, also extends to state agencies such as the WVDEP. 

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