Glasgow Daily Times, Glasgow, KY

State News

February 20, 2014

Ky. high court rejects oil royalties appeal of case from Edmonson County

LOUISVILLE — A decision overturning a $24.7 million jury verdict against Texas-based Atmos Energy will stand after the Kentucky Supreme Court opted not to hear an appeal by landowners who claimed they didn't get their rightful royalties from an oil and gas project.

The ruling by the justices Thursday clears the way for Atmos to push to recover nearly $1.8 million in legal fees and expenses, $591,365 plus interest as alleged damages and $649,680 in bond expenses paid as part of the litigation.

An Atmos Energy spokeswoman declined immediate comment Thursday.

Without issuing a separate opinion, Justices Michelle Keller and Will T. Scott noted they would have granted a hearing in the case.

An Edmonson County jury in 2010 awarded about $7.7 million to the landowners and the rest to a company, owned by Robert Thorpe, that acted as a third-party producer in the project. The jury initially awarded $31.35 million, but post-trial motions knocked $7 million off the final judgment.

The case stems from a series of gas rights deals signed by the landowners in southern Kentucky. The landowners initially signed royalty contracts with two attorneys and an entity known as Park City. Park City later reached an agreement with Atmos Energy, which did the drilling and distributed the money.

Atmos overestimated the amount of gas in the fields, which produced for about a year in 2008 and 2009, but not nearly in the quantities projected by the company.

A unanimous three-judge panel from the Kentucky Court of Appeals in January 2013 dismissed most of the claims brought by the landowners, including allegations that Atmos Energy of Dallas failed to pay promised royalties for drilling on their lands. The court ordered a new trial for the estate of one landowner.

Judge Joy A. Moore, writing for the appeals court, concluded that the landowners failed to make a case against Atmos Energy on several fronts. The landowners argued that they did not receive royalties from the gas and oil produced on their lands. Moore noted that, under Kentucky law, landowners have no claim to own oil and gas found under their property once a lease is signed — the product belongs to the person who signed the lease to drill.

"Therefore, landowners had no ownership rights in the gas removed from their property and, to the extent that their conversion claim relates to that gas, their claim against Atmos fails as a matter of law," Moore wrote.

Atmos has a related federal lawsuit against Resource Energy Technologies, which filed for bankruptcy protection in 2009. The suit, which claims misrepresentation and unjust enrichment by Resource Energy and Park City's owners, is pending in federal court in Kentucky.

 

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