Davis: No legal basis for granting rehearing in gas royalties case

By Kyla Asbury | May 31, 2017

CHARLESTON – West Virginia Supreme Court of Appeals Justice Robin Jean Davis says she believes there was no legal basis for granting a rehearing in the royalties case in which the Supreme Court reversed its previous ruling last week.

Davis filed her dissenting opinion May 30.

“I have combed through the majority opinion several times and have failed to find any legal or factual error in the original majority opinion that this new majority opinion relied upon to justify granting the rehearing,” she wrote. “All that the new majority opinion has done is to provide self-serving reasons as to why it would resolve the issue presented differently. In the final analysis, all that the new majority opinion has done is to conclude that the operative language in the dispositive statute was not ambiguous whereas the original majority opinion reached the opposite view of the statute.”

This difference of opinion, Davis wrote, is not a basis for rehearing. She believes it is simply an impermissible request by the respondents asking the court to change its mind.

Davis said the new majority opinion went to great lengths to misconstrue the manner in which the original majority opinion discussed the decisions in Wellman v. Energy Resources and Tawyney v. Columbia National Resources.

“Contrary to the assertions of the new majority opinion, the original majority opinion had to discuss those cases because they were part of the certified question,” she wrote.

Davis wrote that the new majority opinion found that the applicable language in West Virginia Code is not ambiguous and that it further erroneously concluded that the statute clearly authorized the respondents to deduct post-production costs from the petitioners’ royalty payments.

“I cannot understand how this reasoning by the new majority opinion is supported by the statute,” she wrote. “The statute does not contain any provisions that address the issue of ‘pro-rata deduction or allocation of all reasonable post-production expenses.’”

Davis wrote that it is clear to anyone reading the statute that you cannot discern a legislative intent to allow a deduction for post-production expenses.

“The new majority opinion has used legal sophistry to fool only itself,” she wrote.

In order for the new majority opinion to have reached its unsupported conclusion, it had to create the illusion that the statute was not ambiguous, according to Davis’ dissent.

This point is key because if the new majority opinion had followed basic rules of statutory construction, it would have been compelled to reach the same conclusion that the original majority opinion reached, she wrote.

“In my final thoughts on this matter, I must return to Wellman and Tawney,” Davis wrote. “As I previously noted, those two decisions were jettisoned by the new majority opinion because they presented an impediment to the conclusion that the new majority strained to reach. Those two opinions have been the law with respect to oil and gas contracts for over ten years.”

Chief Justice Allen Loughry authored the majority opinion. Justice Margaret Workman filed a concurring opinion.

The petitioners filed suit against EQT Production Company and affiliated companies for underpayment of royalties, resulting from EQT’s deduction of certain costs incurred for the gathering and transporting of the gas to the interstate pipeline.

Loughry wrote that with all due regard to the previous majority’s consideration of the admittedly complex and subversively entangled issues implicated in the case, the Supreme Court concluded that it did, in fact, misapprehend the applicability of certain common law principles and exceeded its charge in its interpretation of the statute.

Loughry wrote that the Supreme Court readily concluded that the phrase “at the wellhead” is not ambiguous as used in West Virginia Code § 22-6-8.

In her concurring opinion, Workman wrote that she concurred with the majority’s conclusion that the use of the phrase “at the wellhead” must be construed in a manner which most closely effectuates the Legislature’s intent at the time the statute was enacted.

Workman wrote that she wrote separately to emphasize that the majority’s decision to allow cost deduction may not be abused to the detriment of lessors who are chargeable with pre-rata costs and to urge the Legislature to enact specific protections to assure fairness and reasonableness in the calculation of post-production costs.

West Virginia Supreme Court of Appeals case number: 16-0136

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