WHEELING - More than 100 northern West Virginia property owners believe Range Resources Corp. owes them money for natural gas leases signed in 2008, so they are suing the driller in federal court.
Range officials, however, said they had the right to refuse payments because management had not approved the leases, which company "landmen" convinced landowners to sign.
U.S. Court for the Northern District of West Virginia - headquartered in Wheeling - will serve as the battleground for the class action case of Backwater Properties LLC and Aaron Johnson vs. Range Resources and Duncan Land and Energy Inc. Charleston-based attorney Edgar F. Heiskell recently filed the complaint on behalf of the named plaintiffs and other mineral rights owners in Monongalia, Preston, Marion and Harrison counties in West Virginia. To this point, there have been no hearings in the matter, as Heiskell and his son and co-counsel, J. Ryan Heiskell, await a response from Range.
A group of northern West Virginia property owners is suing Range Resources Corp. for failing to pay lease revenues, which the landowners believed they were promised.
Compared to Chesapeake Energy, Range is not a large natural gas player in Ohio, Marshall, Wetzel and Tyler counties. However, the Fort Worth, Texas-based firm is a significant force in the rush to drill for Marcellus Shale natural gas throughout the Mountain State.
"These plaintiffs believe they have been the victims of consumer fraud," Edgar Heiskell said.
"We maintain that Range sent landmen out to contact various property owners in northern West Virginia. These landmen obtained leases for several thousands of acres of property," he said, noting the average plaintiff controls about 100 acres.
Edgar Heiskell said the Range representatives left the landowners with the impression they would be receiving $3,500 per acre in lease payments, with 17 percent production royalties. For someone controlling the average 100 acres, this would mean they would receive a check for $350,000 before any sort of gas production began.
"These people fully expected to get checks for substantial amounts of money," he said. "It was a widespread thought throughout the community that this was a substantial and serious company."
According to Edgar Heiskell's complaint, the Range landmen told the property owners "if they would sign a lease immediately, Range would also enter into a separate contract to pay them a bonus for entering the lease." Heiskell said most of the owners signed with Range in September or October 2008.
The complaint notes that in each case, the landmen returned to the landowners with the gas lease and a bonus contract. The letter accompanying the bonus contract, according to Heiskell's complaint, thanked the plaintiffs "for entering into an oil and gas lease with our firm."
A clause in the letter stated the $3,500 per acre bonus payment was "conditioned on approval of title and management approval of the lease."
"The landmen assured plaintiffs it would be a mere formality of confirming good title before receiving their check," the complaint states.
After the property owners believed they had signed contracts with Range, they received offers from Chesapeake, CNX Gas Corp. and other companies that would have paid them $1,000 per acre and 15 percent royalties on production. However, because the owners believed they had a deal with Range, they could not consider offers from other companies at the time. The complaint notes that once oil and gas prices began to decline in fall 2008, the company returned the contracts to the landowners unsigned and stamped "void."
"Range decided that it was not feasible for them to make the payments at the time because gas prices were going down," Edgar Heiskell said.
"The plaintiffs have experienced economic damages, and we are seeking the amount that was originally offered to them," Heiskell said, though he declined to place a specific dollar amount on suit. "We believe we have a valid and enforceable contract."
Matt Pitzarella, Range public affairs director, however, has a slightly different view of the situation.
"All of our leases, upon signature, require management approval," he said, emphasizing no member of management ever signed off on the leases or bonus contracts.
Pitzarella said the company determined that, upon realizing the decline in gas prices, there were "a number of leases that we did not want to finalize. We clearly communicated that to folks."
Pitzarella also noted those who believed they had signed with Range were "free to lease their gas rights to any other company" during the time. However, these landowners, it seems, believed they were under contract with Range and would be unable to sign with another firm.
Frank Simmerman, attorney representing Range, noted he is in the process of preparing an answer to Edgar Heiskell's complaint.
"I have absolutely no comment about this," Simmerman said.