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Virginia Producers Blast Royalty Lawsuits
In recently filed motions, Virginia’s two leading gas producers blasted would-be class action lawsuits by landowners that seek to collect billions of dollars based on claims that the companies produced coalbed methane gas to which they were not entitled.
Landowners in Virginia are suing Consol Energy Inc. and its CNX Gas Corp.; and EQT Corp. and its EQT Production Co., challenging provisions of Virginia’s Gas and Oil Act of 1990 (see NGI, July 5; June 21).
The cases center on Virginia’s forced pooling provisions, which allow companies to produce coalbed methane when there are conflicting claims to the gas. The landowners claim that when only coal rights are sold the landowners retain the right to the gas. However, the energy companies say they have rights to both the coal and the gas for the leases relevant to the cases.
In its motion EQT argues that the plaintiff in its case, landowner Robert Adair, lacks standing as the tract of land relevant to the gas production he is disputing was included in several pooling orders that specified title to both coal and natural gas.
Further, “in its orders [the Virginia Gas and Oil] Board found that it had jurisdiction, that the applications were properly filed, that the applicant was authorized to drill the wells, and that all interests in the coalbed methane gas in the unit should be pooled…
“The whole purpose of the pooling statute for coalbed methane gas is to allow an operator to develop the unit and to put royalties in escrow pending a determination of ownership. This purpose would be defeated if the rights of the operator under the pooling order are lost once ownership was determined. Under plaintiff’s interpretation, an operator could not securely drill a well unless he held a 100% interest in the coalbed methane gas. Otherwise, the operator would stand to lose the well once any other person is determined to have an interest in the coalbed methane gas.”
In its motion to dismiss the lawsuit brought against it by landowner Walter Short, Consol claims his complaint is “replete with numerous factual misstatements and legal errors [and] should be dismissed for numerous reasons…”
Among these: “Plaintiff’s constitutional attack on the Virginia Gas and Oil Act’s forced pooling provisions ignores settled United States Supreme Court precedent, opinions of the Virginia Attorney General from 2009 and 2010, numerous state court precedents and the foremost treatises in oil and gas law, all of which state unequivocally that compulsory pooling statutes are constitutional and do not constitute unconstitutional takings.”
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