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Marcellus Shale Gas Driller Hit with West Virginia Fraud Lawsuit

Oct 22, 2010 | Parker Waichman LLP

Range Resources, a Texas-based gas drilling company engaged in hydraulic fracturing, or fracking, in West Virginia’s Marcellus shale, has been named in a consumer fraud lawsuit. According to the Associated Press, property owners in Monongalia, Preston, Marion and Harrison counties claim the drilling company cheated them on gas drilling leases.

According to the lawsuit, which was filed in US Court for the Northern District of West Virginia, Range Resources sent landmen out to contact various property owners in northern West Virginia, and obtained leases for several thousand acres in 2008. Range representatives left the landowners with the impression they would be receiving $3,500 per acre in lease payments, with 17 percent production royalties, the plaintiffs claim. Most of the landowners had an average of 100 acres, meaning they expected lease payments of $350,000.

While a clause in the letter accompanying their contract stated the $3,500 per acre bonus payment was “conditioned on approval of title and management approval of the lease,” the plaintiffs claim the landmen characterized this as a “mere formality.”

After signing with Range, the plaintiffs say they were approached by other drillers with more lucrative offers, but did not sign, believing they were under contract with Range.

But the deal with Range never materialized. When gas prices began to decline in fall 2008, the company returned the contracts to the landowners unsigned and stamped “void.”

“These plaintiffs believe they have been the victims of consumer fraud,” their attorney told the Associated Press. “We are seeking the amount that was originally offered to them.”

The class action lawsuit charges Range, along with Duncan Land & Energy Inc., a lease facilitator, with fraud and breach of contract. The lawsuit says anywhere between 500 and 1000 landowners fall into the class.

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