The Times West Virginian

West Virginia

March 3, 2013

Gas company land men accused of fraud

By Vicki Smith Associated Press

MORGANTOWN — Morrell Bolyard wasn’t suspicious when smooth-talking land men started knocking on doors in Preston County a few years back, offering as little as $5 an acre for oil and gas rights.

Bolyard, 72, said he had seen the same thing happen in the 1960s, when the going rate was $1. But the Tunnelton resident figured he could do better, so held out for $100, eventually signing a lease for 413 acres.

Like many of his neighbors, Bolyard had no clue that even in 2007, land companies were paying as much as $5,000 per acre to cash in on the Marcellus Shale natural gas boom that they, geologists and drillers all knew was looming.

“There was a bunch of us that was dumb enough and bit,” Bolyard said.

Bolyard and more than 120 neighbors are now suing the companies they say deceived them in a case that was moved this week from state court to U.S. District Court in Clarksburg.

The lawsuit accuses Magnum Land Services and Belmont Resources LLC of Traverse City, Mich. — as well as about 20 employees — of falsely notarizing lease agreements and recording them in the Preston County Clerk’s Office. They then transferred those illegal leases to Utah-based Sinclair Oil and Gas Co. in 2008, and to Canada’s Enerplus Resources Corp. in 2010, the complaint says.

The allegations include slander of title, fraud, civil conspiracy and official misconduct by a notary public. The residents want the leases invalidated and are demanding unspecified compensatory and punitive damages.

Magnum and Belmont have not yet filed responses with the court, and an attorney representing them didn’t immediately respond to a request for comment.

The residents say they had no attorneys to advise them when they made the deals and no way to know the prices they were offered were “so far below the existing market rate as to shock the conscience.”

While some unsuspecting landowners signed leases for as little as $5 per acre, the lawsuit says, other West Virginians were getting $2,500 to $5,000 per acre, plus royalty rates of 15 percent to 18 percent.

The land men, they say in the lawsuit, exploited “the highly disproportionate levels of bargaining power and the plaintiffs’ lack of knowledge pertaining to oil and gas rights” and fraudulently persuaded them “they had no other option but to sign the leases based on the terms as presented.”

No hearing dates have been scheduled.

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