The landowners also argue that the companies have ignored a 2004 Virginia Supreme Court ruling that suggests they are the rightful owners of the coal-bed methane and so improperly placed a portion of the disputed royalties into escrow. In Harrison-Wyatt, LLC v. Ratliff, the court held that selling one’s rights to coal did not include selling one’s rights to the natural gas produced in those coal seams.
In court papers and interviews, however, the companies say they have accurately calculated and paid all required royalties. The companies also assert that the Virginia Supreme Court’s ruling did not resolve the conflict over the royalties between classes of landowners. Therefore, the companies say they have followed the 1990 Virginia Gas and Oil Act and related directives by the Virginia Gas and Oil Board that require the companies to put one-eighth of the disputed royalties into escrow.
The companies also defend the Gas and Oil Act, whose intent was to spur the Appalachian economy by allowing companies and landowners to benefit from the production of coal-bed methane while setting aside proceeds for disputed claims.
“Our interest is to uphold the constitutionality of the act,” Wade Massie, an attorney for EQT Production, said, adding that the attorney general should defend that law. “The state has an interest that the procedure is run correctly and that everyone gets their day in court.”
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 the legal dispute should be turned into a class action.
In a series of e-mails, Senior Assistant Attorney General Sharon M.B. Pigeon discussed legal strategy with Massie and Jonathan T. Blank, who was representing CNX. In one thread, Pigeon highlighted a procedural defect that would allow the companies to seek the 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.
But Cuccinelli said his office’s role should not come as such a surprise, because his office made a court filing last June asserting the state’s interest in defending the Gas and Oil Act. Brian Gottstein, a spokesman for the office, said Thursday that Pigeon’s e-mails were appropriate even if “overzealous” in tone. But he also shared an excerpt of a plaintiff’s pleading that commended her for her cooperation during the discovery phase.
Republicans, meanwhile, accused Puckett of having a conflict of his own: He works for the southwest Virginia bank that manages the trust. Puckett, who acknowledged his employer’s management of the escrow, denied any conflict.
CNX Gas operates as a subsidiary of Consol Energy, which is headquartered in Canonsburg, Pa., near Pittsburgh, and produces more than 54 percent of Virginia’s coal-bed methane, court papers say. EQT Production, a subsidiary of Pittsburgh-based EQT, produces about 35 percent.
Lynn Seay, a spokeswoman for Consol Energy, declined to comment on Puckett’s request for an investigation by the inspector general. She said the company is reviewing the magistrate’s report and “will respond to the court once that process has been completed.” Blank did not respond to a message seeking comment.