Range Resources Faces Lawsuit For Consumer Fraud
Wheeling Intelligencer
18
October 2010
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.
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.