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U.S. Supreme Court asked to weigh in on West Virginia gas royalties case

By RUSTY MARKS

The State Journal

CHARLESTON, W.Va.  — Members of the U.S. Supreme Court have been asked to consider whether West Virginia Supreme Court Justice Beth Walker overstepped her bounds by taking part in a decision on a case with huge implications for the state’s oil and gas industry.

Attorneys for the estate of Patrick Leggett and other plaintiffs have asked the high court to look at Walker’s pivotal role in reversing an earlier ruling by the state Supreme Court finding that gas companies could not take deductions from gas royalty payments to property owners. The ruling could have cost gas companies millions of dollars in additional royalty payments.

In their U.S. Supreme Court brief, lawyers with the Masters Law Firm in Charleston argue Walker’s failure to recuse herself from considering rehearing the Leggett case was unconstitutional.

Beth Walker’s husband, Michael Walker, owned stock in several gas companies, including companies doing business in the state, attorneys for Leggett’s widow and the other plaintiffs argued.

Michael Walker also was one of Beth Walker’s largest campaign contributors.

“Whether the participation of a judge in a case in which she has a substantial pecuniary interest arising from her spouse’s ownership of stock in companies that will be affected by the decision violates the Due Process Clause of the Fourteenth Amendment,” Masters’ 34-page Supreme Court brief says.

Patrick Leggett and the other plaintiffs originally sued Pennsylvania-based EQT Production Company in federal court in 2013, saying the gas company shouldn’t be allowed to take transportation and production-related deductions from royalty payments made to property owners. The federal judge kicked the question back to the West Virginia Supreme Court in January 2016.

In a 3-2 ruling in November 2016, the state Supreme Court sided with Leggett, saying gas companies couldn’t take deductions from royalty payments for costs occurring after the gas left the well. Justice Brent Benjamin sided with the majority.

Also in November, Benjamin lost a re-election bid to Walker. In January, shortly after Walker took office, the Supreme Court agreed to rehear the Leggett case.

In late May, following the rehearing, the court voted 4-1 to reverse the court’s earlier decision, with Walker casting the deciding vote.

Patrick Leggett died May 7, 2017, and his wife, Katherine was added to the list of plaintiffs in his stead.

Justices voted 3-2 on Jan. 25 to rehear the Leggett case. Leggett’s attorneys discovered in April that Michael Walker owned stock in eight gas and energy companies, including an ExxonMobil subsidiary that operated 800 gas wells in West Virginia. They also discovered that Michael Walker had loaned Beth Walker more than $500,000 for her political campaign.

Leggett’s lawyers asked the state Supreme Court to vacate the rehearing vote and go back to the original ruling of the court, but justices went ahead with the rehearing. Beth Walker said she did not need to recuse herself and said her husband divested himself of his gas interests.

Leggett’s lawyers disagree.

“Justice Walker’s spouse owned stocks of many natural gas and energy producing companies, including shares of at least one company whose subsidiary had significant natural gas operations in West Virginia and was a party to several pending cases presenting similar issues,” the petition filed with the U.S. Supreme Court said. “Justice Walker cast the decisive vote to grant rehearing, and, on rehearing, the court reversed itself and issued a decision favorable to natural gas companies, holding that deductions of post-production expenses were proper.

“Even assuming that she had no conflict of interest when the court decided the merits on rehearing, petitioners’ constitutional rights were nonetheless violated,” the petition says.

The chances that the U.S. Supreme Court will take up the appeal are slim. Of 7,000 to 8,000 cases filed with the high court each year, U.S. Supreme Court justices hear about 80.

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