(11/28/2008)
Judge nixes county try to join lawsuit

By DAVID HEDGES Publisher

Times Record/Roane County Reporter

Counties seeking to collect taxes they would have reaped from royalty payments cannot join a record-setting lawsuit in Roane County.

Roane, Kanawha and Lincoln counties asked for part of the proceeds from a $380 million settlement approved in Roane Circuit Court Saturday.

The class-action lawsuit known as Garrison Tawney vs. Columbia Natural Resources alleged CNR deducted production and other expenses from natural gas well royalties, and hid that from royalty owners entitled to receive a one-eighth share before expenses.

The suit also said CNR was paying several flat rate leases, some of which gave royalty owners only $100 a year, even though those had been prohibited for several years. The suit converted those to one-eighth royalty leases.

Attorneys Chuck Bailey of Charleston and Rob Fisher of Ripley filed a suit on behalf of the three counties, saying the counties lost out on tax revenue they should have collected from the royalties.

Bailey appeared at a hearing Saturday to approve the settlement and presented his case to Roane Circuit Judge Tom Evans. More than 50 people, most of them royalty owners, attended the hearing.

Bailey said the actions of CNR, which also shortchanged the royalty owners, "deprived the counties of revenue they would have been able to recover."

Tom Lane, one of the attorneys representing the royalty owners, said it was unfair to penalize royalty owners since the producers report production figures.

He also said the request made by the counties was not timely, since the case had been in court for five years and the jury's verdict came almost two years ago.

Bailey said the counties could not intervene until there was a settlement to be approved.

Evans said there might be a case for the counties, but it wasn't this case.

"Obviously the royalties are under-reported," Evans said. "But I find no authority for this court to attach property of the plaintiff class.

"If there is relief to be granted, it's not by the circuit court," Evans said. "It's by the county commission sitting as a Board of Equalization and Review."

Evans denied the motion to intervene in the case from the counties.

Roane County Commissioner David Boothe, who attended the hearing, said the ruling won't be the end of it. He said county officials around the state are already exploring their options.

"I've already talked to the executive director of the county commissioners association," Boothe said Monday. "She's interested in trying to do something for the whole state.

"We couldn't think of any county that didn't have some oil and gas production," he said.

Even though their initial attempt was denied, Boothe said it was worth the effort. He said the producers may now have to file amended reports with the State Tax Dept., which determines the production taxed in each county.

"Before we did this, I'm sure nobody was going to report it to the tax department," he said.

In addition to the suit against CNR, he noted that four other gas producers had been named in separate suits.

"I think this could be a far reaching thing," he said. "There's money there.

"Most of what we get will go to the school systems," he said. "And most of them can use all the money they can get right now because of fuel costs and heating costs.

"I don't know exactly what avenue we will be going down," Boothe said. "But I don't think we'll let it drop at all."


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