Gov. Bob McDonnell on Tuesday signed legislation designed to release millions of dollars of contested natural-gas royalties held in state-run escrow accounts to landowners.
McDonnell’s signature came a day after the Bristol Herald Courier won the Pulitzer Prize for Public Service for a series of articles that explored how ownership disputes over coalbed methane gas have led a state board to divert tens of millions of dollars into unaudited escrow accounts.
The legislation clarifies the ownership of coalbed methane, Virginia’s most abundant natural gas, which has historically been claimed by both the landowners and the companies that bought their coal. Two identical bills, sponsored by Delegate Bud Phillips, D-Castlewood, and Sen. Phillip Puckett, D-Lebanon, adopt the conclusion of the Virginia Supreme Court in 2004 that a landowner who sells only coal from his property retains the rights to all of the coalbed methane.
The Virginia General Assembly approved the bills a month ago with virtually unanimous support, and with an emergency clause that makes them effective immediately. Efforts to reach Puckett and Phillips late Wednesday were unsuccessful.
The coalbed methane dispute has prompted the Virginia Gas and Oil Board to funnel royalties into escrow accounts pending a determination of ownership. The accounts, currently undergoing their first audit in a decade, collectively contained more than $25.3 million in March.
Puckett’s and Phillips’ bills also call for the Virginia Auditor of Public Accounts to “conduct an operational and performance review” of the policies for collecting and disbursing money from escrow. A Herald Courier analysis of 18 months of escrow data from 2008-09 found that about one-third of the accounts did not receive royalty payments for months when the corresponding wells produced gas.
Since receiving the newspaper’s analysis, two gas corporations – EQT Corp., and CNX Gas Co. – have deposited more than $1.1 million into escrow accounts that were missing royalties.
“The review shall determine the best practices for the collection of funds from gas operators to ensure that the Virginia Gas and Oil Board receives all moneys owing under law and allocates such moneys to entitled owners,” the new legislation states.
McDonnell signed a separate, related bill into law Sunday that establishes an arbitration process designed to expedite the release of royalties from escrow. That measure, backed by Delegate Terry Kilgore, R-Gate City, calls for a court-appointed arbitrator to resolve a dispute over royalties within six months. The legislation will become effective July 1.
The next hearing of the Gas and Oil Board at the Russell County Office Building is 9 a.m. Tuesday.
dgilbert@bristolnews.com | (276) 645-2558
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