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Thursday, June 13, 2013
In a June 11 commentary, Attorney General Ken Cuccinelli proclaimed that the AG stands with citizens. He claimed his office intervened in lawsuits filed by gas owners because their lawyers tried to have the Virginia Gas and Oil Act declared unconstitutional, and had they been successful, it would have been a travesty for their own clients.
The lawsuits did not challenge the concept of forced pooling (actually introduced in Virginia in the 1982 Oil and Gas Act) but the constitutionality of the deemed lease provision of the act as applied in pooling orders that allow for an inadequate one-eighth royalty and substantial post-production deductions from the royalty.
Also challenged was forced pooling by gas operators that had zero percent of the gas interest leased. The Virginia Gas and Oil Board, which Senior Assistant Attorney General Sharon Pigeon advises, is charged with protecting correlative rights. The deemed leased provision in the act and in the board’s pooling orders do not protect correlative rights.
Southwest Virginia contains some of highest levels of coal bed methane in the United States, yet the royalty paid on this gas is probably one of the lowest in the country.
The right to drill wells is controlled by the operator of the coal seams — which in most of Buchanan County happens to be Consol Energy and its subsidiaries. Because of this, there is no competition and no free market. One either elects to lease at the pathetic rate offered or is “deemed leased” at the same pathetic rate.
Not once in the 23 years of production under the act has any attorney general or the board attempted to objectively assess the value of the gas produced in order to establish a royalty rate or options that would be fair to gas owners and protect their correlative rights.
Also, the plain fact is that few, despite their level of education, can understand the pooling orders. The orders provide little protection or assurance to the gas owner that he will be fairly compensated for the gas sucked from under his property.
Past opinions of the AG support imposing post production charges on gas owners (June 2009) and provide that severance deeds cannot be interpreted by the board (June 2010).
The AG and the board are all aware, and have been for years, of the many issues surrounding gas production under the act, including multiple failures of CNX and EQT to fund escrow accounts.
The AG is empowered to initiate civil action against any person who violates any provision of the act, regulations, orders or conditions of a permit. Shockingly, no action has been taken. For the 23 years the act has been in effect, only one fine ($585 in April 2000) was issued for failure to fund escrow accounts. My family was responsible for that.
Most of the emails referenced by Judge Pamela Meade Sargent and posted on the Bristol Herald-Courier website were dated many months after the AG’s involvement should have ended. One email references a file requested by an attorney for EQT; Pigeon directs him, “Now use it in response to the Motion to Certify a Class Action.” The AG office had no reason for involvement in class certification.
Another one appears to be a reminder by Pigeon to the defendants that arbitration is a third way that claims can be resolved (the other two being agreements between conflicting claimants, usually split, and judicial decisions). This advice was rendered when the defendants were arguing that there was no need for a class action since there were other means to resolve conflicts. Again, this had nothing to do with the constitutionality of the act.
In another email to EQT, Pigeon states that the AG’s office has no plans to argue but offered some points for EQT to argue.
Interestingly, with respect to the claim that the AG “stands with citizens,” in a March 2012 email to CNX, Pigeon interprets an EQT ruling as leaving the door wide open “to demand each & every one of these folks” produce their chain of title documents to support the fact that coal was the only mineral severed throughout the chain of title. We have worn the ink off of our deeds dragging them back and forth to board hearings.
If anyone is deluded enough to believe that the AG stands with the citizens, I direct that person to the past opinions issued by that office, the briefs the AG filed in these actions, and the transcripts from hearings of the Virginia Gas and Oil Board.
Weather JournalEarly mix, then ice storm Sunday