Macker-Meter

Pay out gas royalties to landowners

"I will make it a priority to ensure that the millions of dollars in gas royalties currently sitting in escrow are paid out to the landowners who are owed that money."

 


Sources:

Op-ed, Oct. 30, 2013 (archived version)

 

Subjects: Energy

Updates

Progress with a snag

While running for governor, Terry McAuliffe promised to release a mother lode of methane gas royalties sitting in a state fund to Southwest Virginia residents who own the land where the gas was tapped.

The pledge focused on a decades-old dispute between residents and  energy companies that had obtained rights to extract coal from the properties. The mining releases methane gas trapped in underground seams. Methane was long regarded as an explosive gas that had to be vented from mines for safety. But in recent decades, it has been become a valuable energy source that is captured.

At issue has been who owns the methane rights: landowners and others who lay claim to the money or the energy companies? While legal and legislative fights raged, the General Assembly set up an escrow account for the royalties in 1990 that grew to about $29 million.

"As governor, I will make it a priority to ensure that the millions of dollars in gas royalties currently sitting in escrow are paid out to the landowners who are owed that money," McAuliffe wrote in an Oct. 30, 2013 op-ed in Politico.

So how's that going?

We reported last year that there had been significant progress after McAuliffe signed a law establishing that the gas belongs to the landowners unless the coal companies had proved otherwise. The law went into effect on July 1, 2015.

Attorney General Mark Herring, whose office was involved in negotiations with coal companies, landowners and the state, said at the time that most of the escrow money was expected to be paid out by the start of 2016.

But there's been a snag.

So far, close to $9.1 million has been paid out of the fund and roughly $20 million remains in the account, according to figures given to us this month by the Virginia Department of Mines, Minerals & Energy.

Tarah Kesterson, a spokeswoman for Department of Mines, Minerals and Energy, wrote in an email that "in most cases, we can't find the gas owner" to whom the money is owed.

She told us landowners aren't the only ones owed royalties. Sometimes the rightful gas owners are companies as well as people who once sold their land but continue to have a legitimate claim to the gas extracted from it. Other times, they are heirs to an estate.

Kesterson added that some royalty owners haven't submitted required tax forms to get their payments and about $20,000 in checks that have gone out remain uncashed.

The money is being paid out by the Virginia Gas and Oil Board, a seven-member panel appointed by the governor to mediate energy-related disputes. The board says it expects roughly $20 million total to flow to royalty owners.

Despite the slower than expected pace of disbursements, the Department of Mines, Minerals and Energy said in a Nov. 18 news release the amount paid out so far still "continues to break records."

Regarding the $20,000 in uncashed payments, the DMME says it will  post a list on its website where residents can check whether they've been sent a check. Any check that isn't cashed within three years goes back into the state treasury

The bottom line is that millions of dollars have flowed out of the escrow account to gas rights owners, but there's still a lot more to pay out. So for now, we're keeping our rating of "In the Works."

Sources:

Terry McAuliffe's op-ed in Politico, "Why I'm running for governor," Oct. 13, 2013.

Emails from Tarah Kesterson, public relations manager at the Virginia Department of Mines, Minerals & Energy, Nov. 10-17, 2016.

Interview with Tarah Kesterson, Nov. 10, 2016.

Email from Michael Kelly, spokesman for Attorney General Mark Herring, Aug. 30, 2016.

Virginia Department of Mines, Minerals & Energy, "Over $4 million in natural gas royalty payments disbursed by Virginia Gas and Oil Board," Jan. 11, 2016.

Virginia Department of Mines, Minerals & Energy, "Over $9 million in coalbed methane royalties disbursed to natural gas owners," Nov. 18, 2016.

PolitiFact Virginia, "Pay out gas royalties to landowners," April 14, 2015.

Bristol Herald-Courier, "Thousands in Virginia received checks from gas royalties last year," Jan. 11, 2016.

Bristol Herald-Courier, "Virginia Oil and Gas Board finally do the right thing," Jan. 16, 2016.

Attorney General Mark Herring, "Southwest Virginia landowners to receive millions in royalty payments," April 1, 2015.

Legislative Information System, "H.B. 2058," March 23, 2015.

Huge progress

For decades, millions of dollars in coalbed methane gas royalties have been piling up in a state fund rather than being paid out to southwest Virginia residents who own the land where the resource was tapped.

There had been lawsuits and failed legislative attempts to open the account, set up in 1990 and now worth about $29 million. McAuliffe vowed while running for governor in 2013 that he would put the money in landowners' hands.

"As governor, I will make it a priority to ensure that the millions of dollars in gas royalties currently sitting in escrow are paid out to the landowners who are owed that money," McAuliffe wrote in an Oct. 30, 2013 op-ed in Politico.

The promise focused on a dispute between landowners and energy companies that had obtained rights to extract coal from the properties. The mining releases methane gas trapped within the coal seams. Methane was long regarded as an explosive gas that had to be vented from mines for safety. But in recent decades, it has been regarded as a valuable energy source should be captured.

At issue has been who owns the methane rights: the landowners or the energy companies? The Bristol Herald Courier won a Pulitzer Prize in 2010 for its investigative reporting on the fight.

The General Assembly passed a bill this winter saying the gas belongs to the landowners unless the coal companies could prove otherwise. McAuliffe signed the law, which goes into effect on July 1.

Under the law, gas companies have until Jan. 1, 2016 to ask the Virginia Oil and Gas Board to pay landowners royalties. The panel must pay the claim within 45 days, unless it's disputed by anyone with an ownership interest in the coal bed.

Attorney General Mark Herring, whose office was involved in negotiations with coal companies, landowners and the state over the bill, recently said the "majority" of the $29 million escrow account should be paid to property owners by the end of the year.

The new law does not halt lawsuits filed by landowners accusing the energy companies of undercounting the value of the gas extracted and not paying enough into the fund.

"The priority was to get this money out of the escrow account and into the hands of the landowners," said Brian Coy, a spokesman for McAuliffe. "But it was important to preserve their rights to pursue additional funds if they find that's necessary."

So McAuliffe has made substantial progress on his vow, and the checks should be in the mail later this year. We'll let you know when they arrive.

Until then, we rate this promise "In the Works."

Sources:

Terry McAuliffe's op-ed in Politico, "Why I'm running for governor," Oct. 30, 2013.

Interview with Brian Coy, spokesman for Gov. Terry McAuliffe, April 8, 2015.

Attorney General Mark Herring, "Southwest Virginia landowners to receive millions in royalty payments," April 1, 2015.

Emails from Michael Kelly, spokesman for Attorney General Mark Herring, April 9-10, 2015.

Interview with Michael Kelly, April 9, 2015.

Interview with Tarah Kesterson, public relations manager at the Virginia Department of Mines Minerals and Energy, April 10, 2015.

Legislative Information System, HB 2508, March 23, 2015.

Bristol Herald Courier, "Part 1: The money prison," Dec. 6, 2009.

Bristol Herald Courier, "Part 2: No right of refusal," Dec. 7, 2009.

Bristol Herald Courier, "AG: New Law frees up gas royalties for Southwest Virginia landowners," April 1, 2015.

Bristol Herald Courier, "Legislators looking into escrow solutions," Dec. 27, 2009.

Bristol Herald Courier, "Part 4: The coal industry fights back," Dec. 9, 2009.

Bristol Herald Courier, "Kilgore's bill gets approval in Virginia's General Assembly," March 2, 2015.

Bristol Herald Courier, "House subcommittee kills Kilgore's gas royalties bill," Jan. 24, 2014.

Media General News Service, "Lawsuits accuse gas companies of stealing coalbed methane," June 15, 2010.

World Coal Association, "What is coal seam gas?", assessed April 10, 2015.

Legislative Information System, House Joint Resolution No. 121 from the 2010 General Assembly, Jan. 13, 2010.