This article originally provided by The Charleston Gazette

May 25, 2008

Plaintiffs celebrate royalty ruling

Oil, gas companies vow to appeal to U.S. Supreme Court

By Veronica Nett
Staff writer

The daughter of the lead plaintiff in a landmark lawsuit against West Virginia's natural gas industry said Thursday's decision by the state Supreme Court to deny an appeal request gives "royalty holders their just due."

Lee Anne Tawney Goff said that this is the end of the road for the nearly 9,000 plaintiffs involved in a $405 million class- action lawsuit.

Goff is the daughter of Garrison Tawney, a retired Roane County teacher who started the suit. Tawney died in 2005 at the age of 90.

"He would be really thrilled," Goff said of her father. "Royalty holders, common ordinary citizens, expect to be treated fairly. It's a shame we have to go to court for that to happen."

On Thursday, the state Supreme Court voted 5-0 to deny a request for an appeal from NiSource and Chesapeake Energy. Their action upholds two jury verdicts that required the natural gas companies to pay $405 million to plaintiffs, including $134 million in unpaid gas royalties.

The jury verdict also imposed $271 million in punitive damages to be paid to the plaintiffs, which include thousands of landowners, 150 businesses and major land companies such as Dingess-Rum Properties, Cotiga Land Co. and Horse Creek Coal Land Co.

NiSource and Chesapeake Energy say they plan to appeal to the U.S. Supreme Court because their constitutional rights were violated. But a state constitutional scholar says it's unlikely they will succeed.

Goff also is confident the verdict will stand.

"With a five to zero verdict by the Supreme Court to overthrow the appeal, I don't see how they have a chance at the U.S. Supreme Court level but they have the right to do it," Goff said.

NiSource, based in Merriville, Ind., released a statement Friday that it will petition the U.S. Supreme Court to hear its appeal within 90 to 120 days. The company expects the court to decide whether to hear the appeal early next year.

Specifically, NiSource complained in a news release about "the manner in which the trial was conducted, particularly with respect to the punitive damages award."

The U.S. Supreme Court has overturned a case where punitive damages are considered too high, according to Bob Bastress, who teaches constitutional law at West Virginia University.

But in that case, the punitive damages were more than nine times the economic damages, he said.

The punitive damages in the Roane County verdict are a little more than twice the other damages.

Bastress said lawyers for the gas companies could argue that Circuit Judge Tom Evans did not instruct the jury correctly about how to award punitive damages.

But it takes a lot for the U.S. Supreme Court to overturn a decision like this, he said.

"They've got a tough row to hoe there," Bastress said.

Columbia Natural Resources was taken over by NiSource Inc. in 2000 and eventually resold to Oklahoma City-based Chesapeake Energy Corp., which now owns it.

Chesapeake Energy is the nation's third-largest natural gas owner, behind ExxonMobil and ConocoPhillips.

Chesapeake's vice president of corporate development, Scott Rotruck, declined comment Saturday and referred to a company news release. Phone calls to oil and gas lobbyists Corky DeMarco and Charlie Burd Saturday afternoon were not immediately returned.

According to the lawsuit, the company had lease agreements with the plaintiffs allowing it to drill for gas on land they owned, but it failed to pay them market rates for the gas, as their contracts required.

The suit also charged the company shortchanged the owners by wrongly deducting post-production and processing costs, making volume deductions and by not paying for gas its lines lost.

"We're not against business in West Virginia, but we expect businesses to be honest with us," Goff said.

She said, with 9,000 other plaintiffs in the suit, the damages awarded won't make anyone rich.

"It's not going to be a huge amount to us, but it validates our point," Goff said. "It's for everybody and my dad felt that way too."

The money, Goff said, "will help our grandchild go to college. It will help a lot of people that have children and grandchildren because some of the royalty holders are quite old. They fought for us and now their children will benefit from it. It's a legacy."

Gazette reporter Scott Finn contributed to this article.

To contact staff writer Veronica Nett, use e-mail or call 348-5113.

West Virginia Surface Owners' Rights Organization
1500 Dixie Street, Charleston, West Virginia 25311