The Shadow
BRISTOL (AP) – For six years, the natural-gas royalties belonging to heirs of Buchanan County landowner Fielden Sanders should have been accumulating in a state-run escrow account.
Until November, the account contained $1.56 – a seemingly small sum for the heirs’ 13 percent interest in a well that has sucked up 500 million cubic feet of coalbed methane.
The account should have held much more.
Last month, the energy corporation draining the Sanders’ gas deposited $44,440 into the account holding their royalties. It was one of 20 accounts in escrow that received more than $700,000 combined in deposits that month, after a Bristol Herald Courier investigation showed that they had not received payments for months when the corresponding wells produced gas.
Before November, the 20 accounts contained about $4,600 combined.
In all, energy corporations deposited more than $825,000 into the escrow fund in November – five times as much as the average month in 2009 – bringing the fund’s total balance to $24.9 million.
At least 10 percent of the 766 active individual accounts in escrow received their first payment in a year or longer, according to a Herald Courier analysis.
Gas-well operators pay royalties into escrow whenever they produce gas belonging to people they cannot find or whose mineral ownership is in dispute.
The escrow fund was established in 1990 with the aim of allowing gas corporations to develop the commonwealth’s coalbed methane reserves, regardless of who owns the gas. The fund is overseen by the Virginia Gas and Oil Board.
The corrective payments into escrow came just ahead of the board’s Dec. 15 vote to authorize an audit of the escrow fund, the first in a decade.
Most of the corrective payments were made by Pittsburgh-based EQT Corp., the corporate parent of Equitable Production Co., and the second-largest gas producer in Virginia.
“There were some things that had fallen through the cracks,” Kevin West, EQT’s managing director of external affairs, said in a phone interview last week.
“Once it was brought to our attention, we kind of did an audit of our accounts to make sure there wasn’t something missing that was not identified in what was brought to our attention, and immediately then made those payments into the accounts.”
In late October, the Herald Courier provided EQT with a list of 100 individual accounts in escrow corresponding to gas wells that the company operated. The accounts had not received payments for months despite the corresponding wells having produced gas for at least 10 months during an 18-month period.
West said his company had a program in place that periodically reviews payments into escrow but credited the Herald Courier with expediting the process.
“I think they would have come to our attention eventually and we would have fixed it, but this helped it get done a little bit quicker,” he said.
CNX Gas Co., a subsidiary of Canonsburg, Pa.-based Consol Energy, made what appears to be a corrective payment into the account containing royalties for the Sanders’ heirs.
The account, named for the gas well AZ-100, was one of 90 corresponding to CNX-operated wells that did not receive payments for at least 10 months when the wells produced gas.
When asked to comment, a Consol spokeswoman reiterated the company’s position that it would not engage in a “well-by-well discussion” with a reporter. The company is willing to discuss individual wells with royalty owners, said the spokeswoman, Cathy St. Clair.
Two of the surviving heirs of Fielden Sanders list addresses of Gordonsville and Bedford, state records show. They did not respond to phone messages last week.
An account might not receive monthly royalties for a variety of reasons, according to state regulators and industry representatives.
A mineral owner might have a tiny interest in a well, causing the corporation producing the gas to allow royalties to accumulate to at least $1 before paying into escrow. Or the well might be swallowed up into a larger unit and a separate account created to receive royalties.
Some discrepancies, though, are because gas corporations have failed to file the required paperwork with the state for the royalties to be placed into escrow. The Virginia Department of Mines, Minerals and Energy has acknowledged a backlog of such missing documents and pledged to assign additional staff to clear it.
#AP-DS-12-31-09 0359EST
