Virginia's Greed
Comment: Look at the "forced" and consider the same thing could happen to people all over Virginia if the uranium mining moratorium is lifted, we may be forced to give up our mineral rights and the Canadian uranium corporation could drill on your land for uranium and even mine for uranium! Demand our leaders to ban uranium mining and milling now! Again, the state of Virginia just wants MONEY, pure greed!
DANIEL GILBERT MEDIA GENERAL NEWS SERVICE
Published: January 4, 2010
A Richlands attorney is challenging the constitutionality of the Virginia Gas and Oil Act, arguing that it deprives mineral owners of their property without due process and without guaranteeing them just compensation.
Personal-injury and criminal-defense lawyer T. Shea Cook filed suit last week in Tazewell County Circuit Court on behalf of a Texas resident who was forced by the Virginia Gas and Oil Board in 2007 to lease his mineral interests in Buchanan County to a private energy corporation.
The lawsuit names as defendants Stephen Walz, director of the Virginia Department of Mines, Minerals and Energy; and Bradley Lambert, chairman of the Virginia Gas and Oil Board.
Cook contends that the 1990 Virginia Gas and Oil Act fails to protect the interests of people forced by the state to lease their natural-gas rights. He charges that the regulatory framework improperly has allowed gas producers to deduct expenses from the legally required royalty payments to mineral owners and created a "cartel" of a few dominant corporations that has removed competition from the state's gas market.
Aggravating these factors, Cook argues, is a lack of meaningful state oversight to make sure that energy corporations accurately report production and make the royalty payments. He incorporates as evidence the findings of a recent Bristol Herald Courier investigation that revealed scant oversight and irregularities in a state-run escrow fund holding $25 million of gas royalties in limbo.
Cook has two goals: to invalidate the law, and to spur state lawmakers to cure what he views as its defects.
"What I hope is that the legislature will begin acting in a positive way that creates real oversight and real protection for gas owners in Southwest Virginia," he said.
Among the chief aims of the 1990 statute was to create a way to develop economically Virginia's reserves of coalbed methane -- a gas that clings weakly to coal seams that now accounts for 80 percent of all gas produced in the state.
By allowing private companies to pool 100 percent of the coalbed-methane interests in a state-defined gas unit, the law dramatically expanded gas production in Southwest Virginia.
The practice of forced pooling is common in states, but lingering disputes over coalbed-methane ownership has led the Virginia Gas and Oil Board to funnel millions of dollars belonging to thousands of mineral owners into escrow.
Extracting those royalties requires owners to sue to prove their rights or else agree to a split with another party that claims them.
Cook and Sheffield are not the first to question the constitutionality of the statute. And the state's attorney general already has issued what could foreshadow the state's formal response.
In June, Attorney General Bill Mims defended the gas and oil act and the board's orders as an appropriate use of "police powers" reserved to the state.
Mims, however, won't be in charge of responding to Cook's challenge.
That job will transfer to Attorney General-elect Ken Cuccinelli, a Republican state senator and staunch defender of private-property rights, who in 2007 drafted a reform of the state's eminent-domain statute to strengthen protections for property owners.
The Virginia Gas and Oil Act allows energy corporations to pool the interests of all mineral owners in a coalbed-methane unit -- generally 60 to 80 acres -- and pay them a one-eighth royalty from the proceeds, based on their interest in the unit.
State law gives three options to mineral owners forced to lease: They can choose to participate in a well by footing their proportion of the costs upfront and fully share in the risk and proceeds; choose to receive nothing until the well has paid for itself twice and then share fully in the proceeds; or accept a payment of $1 to $5 per acre for their mineral acreage and a one-eighth royalty according to their interest in the well.
If mineral owners make no choice -- and many do not -- by default they are leased according to the third option.
What a gas owner cannot choose, Cook asserts, is "who he wants to develop the [coalbed-methane] reserves, how he wants to develop it, or when he wants to develop it."
Aggravating these factors, according to Cook, is a general lack of state oversight stretching from accuracy checks on gas meters to compliance checks on corporations required to pay royalties.
Although the Gas and Oil Board voted last month to authorize the first audit of the escrow fund in a decade, Cook was not satisfied.
"Even what has been voted on recently doesn't provide accountability that ensures what is being put into those escrow accounts is what should be there," he said.
Cook also blames state legislators for failing to provide the Division of Gas and Oil with the funding and resources necessary to meet its statutory obligations.
"It is inconceivable that a director with such few employees can adequately carry out the statutory mandate of the 1990 act or provide the necessary regulatory oversight," he wrote.
Read more:
http://www2.timesdispatch.com/rtd/news/state_regional/article/GASS04_20100103-221403/315182/
