(03/13/2007)
Governor Joe Manchin has decided to drop his request for a special legislative session to clarify royalty-holder problems after a Roane County jury awarded the holders $404 million in their suit against Chesapeake Energy in January.

Manchin announced last week he would call a special session to address the matter.

The Charleston Daily Mail says Manchin's decision came after his proposed phase-out of coal-bed methane tax credits failed to pass in the just-ended regular session.

Several natural gas companies in West Virginia have been sued over the royalty issue, after the outfits charged post-production expenses back to royalty holders.

A bill introduced by the oil and gas industry in the just finished legislative session went nowhere.

"We're going to allow the courts to do what the courts do best," said Manchin, implying that legislation was not in order.

Chesapeake spokesman Scott Rotruck said. "We were hopeful there would be legislation that would give certainty to the oil and gas industry so they could increase their investment in West Viriginia...I would like to underscore this is an industry issue. This legislation is needed for the industry."

However, Chesapeake has threatened not to build their executive suite in Charleston and leave the state.

"Even though the legislation would not upset the court verdict for Chesapeake, it is important to have it so there would be a clear understanding between producers and owners as to the calculation of royalties," Rotruck said.

George Hohmann, Daily Mail business editor, said Manchin had proposed phasing out a coal-bed methane tax credit which would have added coal-bed methane to the other natural resources that are taxed.

Manchin told the AP he thought he reached a compromise with his bill's critics by agreeing to postpone the phase-out from July 1 to December 31. But the bill never made it to the House floor, Hohmann reported.

Corky DeMarco, who represents the state's Oil and Gas Association said Manchin's decision to not call a special session "is very disappointing to the industry. It appears that it's almost like retribution, although we were told time and time again the two issues (repeal of the coal-bed methane tax credit and the clarification of the royalty laws) were not connected and there was no interest on the administration's part to connect the two issues."

DeMarco said "He (Manchin) played chicken with us at the last minute and, quite frankly, the speaker held the coal-bed methane bill...We (industry) never defeated the bill."

Asked what the state's natural gas industry will do next, DeMarco said, "I have no idea. We were lobbying for an extension of the coal-bed methane tax credit for six months and a coalition of industry groups had been working on a classification of trout streams with a fish biologist from West Virginia University for nearly a year. We viewed these issues as a three-legged stool."

The industry was apparently behind a bill that eliminated protection of hundreds of WV streams.

Charlie Burd, executive director of the Independent Oil & Gas Association, said, "We'd met with the governor last Friday morning and had been given every indication he recognized the problem (with the state's royalty laws). He thought it was a problem that could be legislatively corrected. We didn't have time to get it done before the end of the (regular) session. He was willing to get the parties together to get a special session called. He understood the Roane County court hadn't taken into account post-production expenses."

"The coal-bed methane severance tax break and the post-production expense issues were separate and distinct, in our opinion," Burd said.

News broke this week that Chesapeake Energy was behind a massive "Coal Is Filthy" ad campaign in the state of Texas, designed to persuade officials there to favor natural gas over coal.

Yesterday, in Roane County Circuit Court, Judge Thomas Evans III, ruled on a request by Spencer Newspapers, to keep post-trial settlement hearings open to the media and the public.


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