Virginia Republicans say a Democratic state senator who called for the state’s Inspector General to investigate Attorney General Ken Cuccinelli II’s handling of a complex legal dispute over mineral rights may have his own potential conflict of interest.
Sen. Phillip P. Puckett (D-Russell) should have disclosed that he is an official at the bank that manages an escrow account holding nearly $28 million in disputed natural gas royalties that are at the heart of the controversy, a GOP spokesman said Thursday.
J. Garren Shipley, a spokesman for the Republican Party of Virginia, also suggested that by supporting a bid by southwest Virginia landowners to create a class action in federal court over the dispute — a legal maneuver that Shipley noted was led by out-of-state attorneys — the case could drag on even longer, allowing the bank to keep the escrow money on its books.
“The longer this case goes on, the larger that account and those interest payments grow,” Shipley said. “Shouldn’t he have revealed his own interest in this case?”
Puckett is vice president of business development at First Bank and Trust Co., an Abingdon-based firm that oversees the escrow account for the Virginia Gas and Oil Board. He acknowledged in an interview Thursday that his bank manages the escrow account. But he also said he had nothing to do with the bank’s winning bid for the account or its current management.
“I understand politics, and they can do whatever they want. I would welcome anyone that wants to contact the Inspector General’s office to go ahead,” said Puckett, who asked the inspector general to investigate the attorney general’s intervention in the case for possible ethical or legal violations.
Puckett also rejected the notion that his support for creating a class-action suit would only delay any resolution, thereby letting his bank retain the funds as long as possible. Puckett said he believes that allowing the dispute to proceed as a class action would expedite a resolution.
He said that he has worked to find solutions so that disputed claims to the royalties could be settled and the funds in the account could be released to their rightful owners. In 2010, Puckett co-sponsored legislation that was intended to settle the long-running dispute over coalbed methane royalties and release the escrowed money. Despite the bill’s passage into law, however, the dispute remains.
The complex legal battle over mineral rights in Virginia’s coal country has become the latest battleground in the state’s bitterly fought gubernatorial race, with Democrats accusing Cuccinelli of improperly siding with two Pennsylvania energy companies against Virginians who say the firms cheated them of natural gas royalties.
Democrats, along with the campaign of Democratic gubernatorial candidate Terry McAuliffe, have attacked Cuccinelli for jumping into the case on behalf of the energy companies, particularly in light of more than $111,000 in campaign contributions Cuccinelli received from one of them. Cuccinelli has said his office shared a common interest with the companies in upholding the Virginia Gas and Oil Act that underlies the dispute and only intervened for that purpose.
The case — which involves potentially hundreds of landowners and millions of dollars — pits several landowners against two of Virginia’s largest producers of natural gas pumped from coal seams, which is known as coal-bed methane. CNX Gas, which operates as a subsidiary of Consol Energy, produces more than 54 percent of Virginia’s coal-bed methane. EQT Production produces about 35 percent.
The landowners argue that the companies, despite a 2004 Virginia Supreme Court ruling that sought to clarify the ownership rights to coalbed methane, continued to dispute the landowners’ claims and instead deposited a portion of the disputed royalties into escrow.
But the companies also say they have accurately calculated and paid all of the required royalties. And they assert that the Virginia Supreme Court’s ruling did not resolve the conflict over the royalties between classes of landowners.
As a result, the companies say they have had no choice under the 1990 Virginia Gas and Oil Act and rulings by the Virginia Gas and Oil Board that require them to put one-eighth of the disputed royalties into escrow.
The landowners also hope to press their claims as a class-action lawsuit, saying they would have a fairer chance in court than if each landowner has to battle the energy companies alone. The companies have resisted, arguing that some conflicting claims are so tangled that each deserves its own airing.
The attorney general’s assistance came to light in an 85-page opinion issued last week by U.S. Magistrate Judge Pamela Meade Sargent, who was analyzing whether to certify the dispute as a class action.
In a series of e-mails, Senior Assistant Attorney General Sharon M. B. Pigeon collaborated with attorneys representing the energy companies. In one thread, Pigeon highlighted a procedural defect that would allow the companies to seek dismissal of a plaintiff’s case.
“Shockingly, these emails show that the Board, or at least Pigeon, has been actively involved in assisting EQT and CNX with the defense of these cases, including offering advice on and providing information for use on the Motions currently before the court,” Sargent wrote.
Attorney General spokesman Brian Gottstein said Thursday that Pigeon’s communications with the energy companies were appropriate, although her tone in the emails might at times have been “overzealous.”
An employee at the Inspector General’s office, in an e-mail to Puckett, acknowledged that the office was looking into it. The office has not returned several calls seeking comment.