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Ruling due on Brinker Storage leases

October 14, 2012
Salem News

LISBON - A ruling in county Common Pleas Court later this month will determine whether complaints filed against Columbia Gas Transmission fall under state law or federal law.

The complaints are from those owning land in what is known as the Brinker Storage Field operated by Columbia Gas. They say the long-standing natural gas leases held by Columbia are blocking them from signing new leases with Chesapeake Energy LLC.

Columbia moved to have the suit sent to federal court this summer, but the court ruled the landowners' claims didn't fall under federal law and sent the suit back to the county.

According to court documents, Columbia requested the court reconsider the decision and said that if the landowners won it would mean the Brinker Storage Field would be "abandoned, partially and in piecemeal fashion, lease by lease and tract by tract."

The company also said the landowners' complaints are "garbed in state law" and a "de facto collateral attack" on its Federal Energy Regulatory Commission (FERC) certificate. The certificate was granted, the company said, based on the commission's holding that the storage field is "necessary and in the public interest."

"Plaintiffs' requested relief seeks to force Columbia to abandon portions of its Brinker Storage Field, something the Natural Gas Act does not empower a state court to do," the company said.

The company also argued the matter is federal since it operates and maintains an extensive interstate natural gas distribution and transportation system. The roughly 35,000-acre Brinker Storage Field is one of others the company uses to store gas under the ground in the Berea sandstone during the summer months. The excess gas is then pulled from storage during the winter when the market demand exceeds production.

Landowners and their lawyers claim the company has breached the existing leases as oil and gas has not been produced there for at least 30 years and landowners have not received any compensation from the company.

The leases date back to as early as 1940, and most offered $1 per acre and $200 annual royalty payment a far cry from the more than $5,000 per acre and sometimes upwards of 15 percent royalty offered by Chesapeake. The royalties are continually paid as long as oil and gas are recovered from a property.

The current landowners, and even Chesapeake, were unaware of the existing leases when they were discussing lease agreements. It wasn't until Chesapeake conducted a property search that the existing leases were discovered. The company then pulled back the offers since the property was already leased.

Sean Scullin, of Scullin and Cunning Law Offices in Boardman, the firm hired to represent the more than 80 land owners, said Columbia's recent efforts to bargain with them are falling short.

The company, along with Hilcorp Energy, held private meetings with landowners in Columbiana last month, and although officials won't reveal specifics of what was discussed, landowners claim they have offered an amendment to the existing leases that would include a 12.5 percent royalty. Whether the royalty is on the gross amount was not clear.

Scullin said the offer was "very ambiguous" and that roughly 30 landowners joined the already existing lawsuit shortly after the meetings. The suit now covers roughly 5,000 acres in Salem, Center, Fairfield and Elkrun townships.

"If Columbia wins, this money and minerals leave town. If landowners win, this money stays in the county," Scullin said.

Visiting Judge Richard Reinbold Jr. is expected to rule on the matter Oct. 24. The suit was originally put before judges C. Ashley Pike and Scott Washam, but the two removed themselves due to knowing most of the land owners involved.



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