| By Bob Weaver
The WV Supreme Court has issued what could be a landmark decision affecting natural gas royalty holders in West Virginia.
The court ruled 5-0 on June 15 that Columbia Natural Resources (CNR), now Chesapeake Appalachia, wrongfully deducted expenses, both real and otherwise, from natural gas royalties.
Royalty holders claim they were cheated of the fair market value of the natural gas.
Several large companies began deducting their expenses related to drilling and delivering natural gas from their wells about 1993, the amount being taken from royalty holders.
A Roane County native, the late Garrison Tawney, was among the first to complain and take action against the company, mostly related to what he described as a "rip off" of deep well royalties, to which he was a holder.
Tawney told the Herald, "In WV they have the clout to do about whatever they want, unless people fight back."
The ruling will have a major impact on how companies, both large and small do business, resulting in a large number of WV holders being entitled to supplemental royalty payments going back to 1993.
The class action suit was filed by about 10,500 royalty holders.
"It is likely one of the largest damage suits filed for breach of contract in WV," said Spencer attorney George Scott, who was involved in the litigation.
The June 15th ruling was only one of four issues to be settled in the suit.
"There are other substantial issues to be decided," said Scott.
Scott says the court decision initiates a series of efforts to determine how much the corporation "cheated" the royalty holders, a step toward repayment, but other damages could be awarded in the case.
LAWYERS FILE SECOND CLASS ACTION SUIT
By David Hedges, Publisher
Times Record-Roane County Reporter
www.thetimesrecord.net
Published, June 22, 2006
Another class action lawsuit, the second against a large gas company in three years, has been filed in Roane Circuit Court on behalf of natural gas royalty owners.
The latest suit seeks payment from Equitable Production Co. for royalty owners who allegedly did not receive fair market value for their interests.
The suit was filed the same week a ruling was handed down, which favors plaintiffs in an earlier class action suit filed against Columbia Natural Resources.
Many of the same attorneys are involved in both suits, including Marvin W. Masters of Charleston, retired Roane Circuit Judge George M. Scott and former federal prosecutor and gubernatorial candidate Michael W. Carey.
The suit filed in 2003 against CNR, believed to be the first class action lawsuit in Roane County history, has grown to involve over 8,000 plaintiffs.
Although the case is still pending before Roane Circuit Judge Tom Evans, Evans asked the state supreme court to settle the question of whether natural gas production companies can pass along part of the production expenses to royalty owners of natural gas wells.
CNR has been deducting a share of the cost of transporting gas from the wellhead to a transmission line from payments to royalty owners.
According to CNR leases, a well owner is entitled to 1/8 of the price of natural gas from their well, "less all taxes, assessments and adjustments."
The supreme court ruled that CNR could not pass along those costs to royalty owners, unless it is specifically outlined in the lease.
The ruling involves about 1,400 of the plaintiffs in the suit.
Two supreme court justices disqualified themselves including Robin Davis, whose husband, Scott Segal, is one of the attorneys representing the royalty owners, and Brent Benjamin, who, before he joined the court, was a member of a firm that represented CNR.
Raleigh Circuit Judge H.L. Kirkpatrick III and Kanawha Circuit Judge Tod J. Kaufman replaced them in the case.
The suit filed last week against Equitable alleged royalty owners were not paid all they were entitled to and were sent deceptive documents by the company.
A company Web site says Equitable Supply is the largest natural gas supplier in the Appalachian basin, with reserves in excess of 2 trillion cubic feet.
Named as plaintiffs in the latest suit are The Kay Co. LLC, Diane Kile Green, heirs of Luther E. Kile, the H.A. Robson Trust by Edwin N. Vinson, David H. Daugherty, Mary Blair V. Chapuisat, H. Dotson Cather, trustee of Diana Goff Cather trusts; Clyde Emerson McClung and James E. Hamric III.
The filing says the case should be ready for trial by December 2008.
Hur Herald Archives
COLUMBIA GAS ROYALTY HOLDERS CLAIM THEY WERE CHEATED - "Common Fraud" Alleged In Suit (07/31/2004)
By Bob Weaver
A major lawsuit claiming fraud has been filed against one of the state's largest gas producers.
A class action suit against Columbia Natural Resources claims the company violated covenants in lease agreements, according to Spencer attorney George Scott, whose firm is representing about 8,500 (later 10,500) royalty holders.
The suit says Columbia used a self-serving advance sale of natural gas that cost the royalty owners up to 50% of what they should have been paid.
It claims the company sold gas collected from the wells at less than market value to their own subsidiaries, cheating the royalty owners.
"This class-action lawsuit is seeking total regress from Columbia Gas Resources for several violations of lease holder agreements. These violations have been going on for years," said attorney Scott.
The suit suggests multi-millions of dollars have been skimmed from royalty holders by "common fraud," using several mechanisms to increase corporate profits.
In what seems to be an elaborate plan, Columbia is accused of using gathering charges or processing fees to take money from the royalty holders, including charging royalty holders with company operating expenses.
A few months ago the West Virginia Supreme Court denied Columbia's effort to stop the suit.
Some of the alleged problems surfaced early-on around CNR's deep well drilling in Roane's Geary District.
Columbia denies any wrongdoing.
The suit is expected to go to court by July, 2005.
See also ... LAWSUIT CLAIMS COLUMBIA GAS COMMITTED COMMON FRAUD - Class Action Suit Says Company Cheated Leaseholders
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