Dominion Transmission, the pipeline transport subsidiary of energy giant Dominion, is being sued over a lease deal in Preston County, West Virginia signed in 1955. Dominion drilled a single well in 1959 which let it retain rights to develop more wells in the future in perpetuity. According to the lawsuit, Dominion assigned the lease rights to its subsidiary Dominion Transmission with plans to someday use the geological formations of the land as a natural gas storage field. Such activity would yield no royalties for the landowners who want to nullify the lease and find someone who will actually drill gas wells on the property, specifically tapping the Marcellus Shale.
A Charleston gas developer and some West Virginia landowners say it’s time for Dominion Transmission to give up leases for oil and gas rights that it duped people into signing more than 50 years ago with no intention of sinking wells.
A lawsuit set for trial this summer in Preston County accuses Dominion of conspiracy and fraud, claiming the goal was only to tie up the reserves so no one else could drill there.
"We think these people have used a bait-and-switch deal," said plaintiff David Callaghan, who joined Northstar Energy and others in suing Richmond, Va.-based Dominion over about 670 acres in Preston County, including 328 acres near Rowlesburg.
The lawsuit claims the mineral rights owners on the 328-acre tract thought they were negotiating in 1955 for royalties on gas production and were led to believe multiple wells would be drilled.
In fact, they say, only one was — in 1959.
The lawsuit demands not only damages for lost royalties on gas production and compensation for "extreme hardship," but also punitive damages to deter future bad conduct by the company.
It also asks to end the leases so the landowners can pursue drilling with other companies.
"Now, after 50 years of waiting for any more development, they tell you they’re not going to allow you to ever benefit from the Marcellus Shale or any other oil and gas under your property because they might put a storage facility there someday," said Northstar’s principal, Jim Abcouwer.
"Your minerals are rendered worthless forever, and if they make millions on their storage operation, you still get nothing," he said. "This is the elaborate scheme played on hundreds of mineral owners in Preston County."*
*The Charleston Gazette/AP (May 26, 2011) – Gas company sued over leases