Court Recommends Certifying Class Action for Virginia Coal Gas Rights Owners

On June 5, 2013, U.S. Magistrate Judge Pamela Meade Sargent recommended that the U.S. District Court grant class-action status to lawsuits filed on behalf of thousands of landowners in southwest Virginia against EQT Production Company and CNX Gas Company, both Pittsburgh-area energy companies with natural gas wells across Appalachia.

Through these cases, Plaintiffs seek to obtain the release of millions of dollars in gas royalties that properly belong to gas owners in Virginia and that have been held in a state escrow account for years as a result of CNX’s and EQT’s actions. Plaintiffs also allege that EQT and CNX have underpaid and miscalculated gas royalties owed to them.

The Virginia Gas and Oil Board ultimately granted conditional leases to EQT and CNX and placed royalties in an escrow account pending resolution of the conflicting claims. The royalties placed in the escrow account amounted to one-eighth of net proceeds of the drilling. The class action complaint alleges that the Virginia Gas and Oil Board subjected the landowners to “an involuntary lease” and established a below-market royalty rate for the methane gas.

In 2004, the Virginia Supreme Court found that methane gas is a “distinct mineral estate” from coal, concluding the landowners owned the rights to natural gas removed from their properties. In her opinion this week, U.S. Magistrate Judge Sargent wrote, “Quite frankly, I am of the opinion that the Virginia Supreme Court has decided this issue.”

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