Va. AG: Gas and Oil Board lacks authority to determine gas ownership

Three times in the past three months, Jamie Hale has taken off from his job at a Buchanan County power plant and trekked to hearings of the Virginia Gas and Oil Board in Lebanon, Va., his property deed in hand.

Each time, he has asked the board to read his property deed and to conclude what the Supreme Court of Virginia concluded of a similar deed, and what a newly reformed Virginia statute states broadly – that he and his family own the coalbed methane being drained from beneath their land. That they own thousands of dollars in royalties held in state-controlled escrow accounts.

Each time, the board has deflected his request, pending a formal opinion from Virginia’s attorney general.

That opinion, obtained Wednesday by the Bristol Herald Courier, contains this message to Hale and thousands of landowners in his position: Nothing in the new law “purports to create new authority or to expand the existing authority of the board to adjudicate mineral ownership rights.”

Simply put: Don’t take your deed before the board. The board can’t do anything with it.

The opinion by Attorney General Ken Cuccinelli – bearing a date of June 24 but first published online Wednesday at www.tricities.com – comes three months after Gov. Bob McDonnell signed emergency legislation clarifying the ownership of coalbed methane gas.

In the past two decades, disputes over coalbed methane ownership – generally between landowners and the companies that bought their coal – have caused the Gas and Oil Board to divert millions in gas royalties into escrow accounts. Legislation carried this year by two Southwest Virginia legislators sought to end this dispute and dislodge royalties in escrow by declaring that landowners, like Hale, who sold only their coal reserved their rights to coalbed methane.

The legislation went into effect immediately, but it has not liberated any of the more than $26 million in escrow – to the consternation of landowners who have never been paid for the gas sucked from beneath their land, and the lawmakers who sponsored the bills.

“I don’t know how you can make it any clearer than what the law says there,” Sen. Phillip Puckett said Wednesday by phone.

Calling Cuccinelli’s opinion “very disappointing,” the Lebanon Democrat reiterated his view that board members should be able to read individual deeds and apply the new law when it comes to determining whether there is a legitimate dispute over coalbed methane ownership.

“For the life of me, somebody tell me what this board’s supposed to do?” Puckett said, quickly adding that he has a “great deal of respect” for board members.

The opinion, while noting the “significant revisions” to the Virginia Gas and Oil Act, maintains that the board is limited by statute to disburse royalties from escrow in three ways: after a court determines ownership, after the parties in conflict agree to split royalties, or – effective beginning today – after a binding decision by a court-appointed arbitrator.

Cuccinelli’s opinion is not exactly a shocker.

At an April board hearing, the state’s top energy official expressed his view that the legislation sponsored by Puckett and Delegate Bud Phillips, D-Castlewood, “didn’t change the authority of the board.”

Butch Lambert, the board’s chairman, asked Cuccinelli for a formal opinion as to whether the new law authorized the board to make decisions “based on the interpretation of deeds and contracts.”

In May, Cuccinelli was elusive when asked whether the statute’s new clarity in defining coalbed methane ownership should trigger the release of royalties previously considered in dispute.

“By definition, if there isn’t a conflict over a particular piece of property, then the money associated with that property ought to be distributed,” Cuccinelli told the Herald Courier.

But just what constitutes a “conflict” is not spelled out in the law. And the attorney general was skeptical about whether the reforms would be sufficient to release the millions of dollars in escrow.

“The law that was passed this session was a pretty gentle way to go about trying to do it,” Cuccinelli said in the May interview. “And if it was too gentle, which is my anticipated observation, then we’ll come back and look for something that pushes harder.”

On Wednesday, Puckett said he plans to pursue legislation that would explicitly expand the board’s authority.

“The next step from a legislative standpoint is to introduce a piece of legislation that clearly instructs the board to look at that deed” and apply the law to determine whether royalties should be escrowed, Puckett said.

dgilbert@bristolnews.com | (276) 645-2558