Southwestern Energy said yesterday that the lawsuit brought byroyalty and mineral rights owners alleging damages from anunderground natural gas storage facility in Franklin County, AR isnot supported by the facts or the law, and said that it had actedaccording to the guidelines of the Arkansas Oil and Gas Commission.

The response was to a class action lawsuit filed againstSouthwestern, based in Fayetteville, AR, which alleges that theroyalty and mineral rights owners are owed damages that resultedfrom the company’s operation of the storage facility.

Southwestern responded that specifically, the AOGC authorizedthe company’s subsidiaries to use the gas storage facilityfollowing “proper notice and full public hearings n 1968,” and saidthat the facility had been “in continuous use for more than 30years.” Written agreements were obtained from the property ownersat the time, and those owners “have been continuously paidcompensation for the right to gas storage at the Stockton GasStorage Unit.”

In 1997, after obtaining new geological and engineering datafrom drilling in the area, the AOGC expanded the area limits of theunit, and the commission’s certified order found that the Stocktonfacility was “suitable” for the storage of gas and that its use forgas storage was in the public’s interest.

“The company denies the plaintiffs’ allegation that they areentitled to ownership rights to the natural gas that the companyhas injected into the storage facility,” said Southwestern CEOHarold Korell.

After AOGC expanded the area limits of Stockton, Southwesternsaid that it began negotiating with the property owners, and hadobtained the storage rights from most, but not all, of the propertyowners. Before the plaintiffs filed the lawsuit, the company hadbeen “actively pursuing the acquisition of agreements with allremaining property owners,” said Southwestern. When the lawsuit wasfiled, Southwestern stopped negotiations and now has beguncondemnation proceedings to allow the court to determine the fairvalue of the remaining property owners’ gas storage rights.

“We have been working for a number of months with affectedproperty owners to provide fair compensation for the use of theirproperty for gas storage,” said Korell. “Because of theirsignificantly divergent interests, we believe that the court willdeny class action certification of this lawsuit.” Ultimately,Southwestern does not think that the lawsuit will “be material toits consolidated financial position or results of operations.”

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