Class action lawsuits accuse two leading energy corp. of stealing natural gas

ABINGDON, Va. – Twin class action lawsuits filed Tuesday accuse two leading energy corporations of stealing natural gas belonging to Southwest Virginia landowners and attack the constitutionality of the state law that has allowed it to happen for 20 years.

The federal lawsuits charge that the Pittsburgh-area companies Consol Energy and EQT Corp. have illegally exploited provisions of the 1990 Virginia Gas and Oil Act to produce a gas that belongs exclusively to landowners, who have never been compensated. The plaintiffs argue that they should be paid for all of the coalbed methane gas the companies have produced from beneath their lands, past and future.

The two lawsuits will be followed by a series of class action complaints seeking damages against energy companies for underpaying royalties owed to landowners in all of the gas-producing counties of Southwest Virginia, lawyers for the plaintiffs said.

One lawyer for the legal team that represents both classes of plaintiffs characterized the lawsuits as “life-changing and society-transforming.”

“What we are talking about here is breathtaking thievery,” said Don Barrett, a Mississippi lawyer who is a veteran of the class action lawsuits against tobacco companies in the 1980s and 1990s. “The system’s broken in Virginia, unlike any other place in the country. And that’s what they make courthouses for.”

Asked to comment on the lawsuit, a spokeswoman for Consol e-mailed, “Our corporate policy is not to comment on any pending litigation.”

An EQT spokesman did not respond to e-mail and phone messages seeking comment Tuesday afternoon.

The lead plaintiff in the case against Consol and its gas-producing subsidiary, CNX Gas Co., is Walter Short, an 81-year-old resident of Russell County who hauled coal and ran an Army & Navy store before retiring. Short and his siblings own all minerals except coal on about 55 acres in Buchanan County first purchased by their grandfather.

Robert Adair, 60, lead plaintiff in the lawsuit against EQT, is a retired coal mine inspector for the federal Mine Safety and Health Administration. The Tazewell, Va., resident owns mineral rights to at least 132 acres in Dickenson County originally bought by his grandfather.

Adair and the Shorts never agreed to lease their mineral rights, and have never received royalties from coalbed methane, which accounts for more than 80 percent of all natural gas produced in Virginia. Instead, the Virginia Gas and Oil Board determined that they and landowners like them were in conflict with the companies that owned their coal over the rights to coalbed methane. The board granted conditional leases to companies like CNX and EQT – “subject to a final legal determination of ownership,” as state law allows – and directed the gas producers to pay a statutory one-eighth royalty into escrow accounts, pending such a determination.

As of May, the more than 800 individual accounts in escrow collectively held $26.2 million.

The plaintiffs contend that the Supreme Court of Virginia resolved the ownership question in 2004, when it ruled that landowners who owned all of their minerals except coal also owned the rights to coalbed methane. In April, state lawmakers put that ruling into the Code of Virginia in an effort to resolve any lingering dispute over the gas.

Before the 2004 ruling in Harrison-Wyatt, LLC v. Ratliff, it was a gamble for companies like CNX and EQT to produce coalbed methane, staking their claim to the gas through their coal holdings and leases, said Peter Glubiak, the Richmond lawyer who won the 2004 Supreme Court ruling and who is part of the legal team representing the Short and Adair classes.

After the high court’s ruling, Glubiak said, producing coalbed methane was no longer a gamble for CNX and EQT. “The Supreme Court said, ‘It ain’t yours.’ After that point, [the companies] knew, and they were just stealing. They were stealing people’s gas.”

The lawsuits ask a federal judge to declare that the plaintiffs alone own the coalbed methane, and to order the release of their royalties from escrow. But the one-eighth royalty that companies have paid into escrow is only the “tail of the dog,” said Larry Moffett, a Mississippi lawyer who is the gas and oil expert on the plaintiffs’ legal team.

Even as they challenge whether companies have accurately paid the one-eighth royalty into escrow, the plaintiffs demand to be paid the other seven-eighths of the proceeds from coalbed methane production as unleased mineral owners.

The lawsuits also ask a judge to declare unconstitutional the provision of Virginia law that sets a one-eighth royalty for landowners, like the plaintiffs, deemed to have leased their mineral rights by the Gas and Oil Board. The one-eighth royalty is substantially less than it would be if a lease were negotiated in a “free, open and competitive market,” the lawsuits claim.

“We think the law is unconstitutional the way it has been applied,” Barrett said, comparing the statute to literacy tests that were found to violate the civil rights of African-American citizens in their application.

“The way this 1990 statutory scheme has been applied, people can’t get their money,” Barrett said, arguing that the law has facilitated an “unconstitutional taking” of landowners’ property.

Barrett and company maintain that a class action is the best, and perhaps the only way for landowners to collect royalties from coalbed methane.

“Absent a class action, many members of the class will find the litigation costs regarding their claims so prohibitive that they effectively would be unable to seek any redress at law,” both lawsuits state.

The plaintiffs’ team, including the firms of Barrett, Moffett and Glubiak – and the large firm of class action specialists at Lieff, Cabraser, Heimann & Bernstein LLP – will front the costs of the litigation, and absorb them if they lose. The team has sufficiently deep resources that it will “not be money-whipped” by Consol and EQT, Barrett said.

Their services, however, will not come free. If the plaintiffs prevail at trial or secure a settlement, the lawyers will ask for some percentage of the total.

Barrett, Moffett and Glubiak would not put a dollar figure on what they expect to recover for plaintiffs, or speculate about what percentage they should receive.

“It’s a big case,” Barrett said. “It’s a very big case. We’re going to be all-in, and we’re in for the long haul.”

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