This article originally provided by The Charleston Gazette

October 24, 2008

Roane County gas royalties case settled

By Ken Ward Jr.
Staff writer

CHARLESTON, W.Va. -- NiSource Inc. and Chesapeake Energy have agreed to pay $380 million and drop their appeals of a jury verdict that found the companies cheated thousands of landowners out of their oil and gas royalties.

NiSource announced the deal in a news release issued late Friday afternoon, a day after the proposed settlement received preliminary approval in Roane Circuit Court.

Plaintiff class members may still object to the deal or opt out of the settlement. The deal is subject to final approval by Circuit Judge Tom Evans, following a fairness hearing currently scheduled for Nov. 22.

The settlement is about 6 percent less than the $404 million verdict in the case, but the deal would end appeals to the U.S. Supreme Court.

"It was the prudent thing to do and it was in the best interests of the entire class," said Marvin Masters, a Charleston lawyer who was among those representing plaintiffs in the case.

In its news release, NiSource said that the settlement calls for creation of a $380 million settlement fund, with its share being $338.8 million.

Roane County jurors originally awarded a class of more than 10,000 gas-well owners $134 million in compensatory damages and $270 million in punitive damages.

The case focused on whether gas drillers could deduct production costs before calculating payments to land and mineral owners. The lawsuits alleged that oil and gas companies schemed to intentionally mislead mineral owners into believing that they were being paid all of the royalties due them.

The verdict prompted an outcry from the oil and gas industry, and led Gov. Joe Manchin to try unsuccessfully to rewrite state gas royalty laws. The state Supreme Court declined to hear Chesapeake's appeal, a move that helped prompt Manchin to urge the court to give full appeal hearings to all punitive damage awards in cases that allege corporate wrongdoing.

The thousands of plaintiffs in the case included not only individuals, but more than 150 businesses and large land companies, including Dingess-Rum Properties, Cotiga Land Co. and Horse Creek Coal Land Co.

The court battle was know as the Tawney case, for Garrison G. Tawney, a retired Roane County teacher and royalty owner who died in 2003, not long after the original lawsuit was filed.

Reach Ken Ward Jr. at kw...@wvgazette.com or 348-1702.