“Underfoot, Out of Reach”

Daniel Gilbert

By Daniel Gilbert

In October 2008, I wrote a story about an energy conglomerate making conspicuous payments to private entities in Southwest Virginia run by influential figures. A source read that story and suggested I probe the Virginia Gas and Oil Board, an obscure state panel that rubber-stamped whatever the gas industry requested, and had diverted tens of millions of dollars in gas royalties into escrow accounts over the last 20 years.

At a hearing the next month, I watched as the board leased landowners’ gas rights against their will to energy corporations. I spoke with landowners who had never been paid for their gas, and who didn’t understand why their royalties were going into escrow – or how to collect them. I found in the board’s minutes that about $25 million was sitting in escrow. My editor and I decided the story was worth pursuing.

The complexity of the topic, and my daily obligations, meant that I had to chip away at the reporting incrementally over 13 months. Whenever I ran up against something I didn’t understand (which was often), I made lists of people I thought could explain it to me and contacted them to move the story forward.

I learned that the board was channeling royalties into escrow because of a dispute over the ownership of coalbed methane gas – even though the Virginia Supreme Court in 2004 ruled that landowners, not coal companies, owned the lucrative gas. To dissect the controversy, I reviewed hundreds of pages of board transcripts and internal memos obtained through public records requests. I researched deeds and lawsuits in far-flung rural courthouses. In all, I interviewed more than 70 landowners, energy analysts and experts, and local and state officials for the initial series.

I also wanted to check whether gas corporations were making the required payments into escrow. Each individual escrow account (there are about 800) corresponds to at least one gas well. In general, an account should receive payments for months when the corresponding well produces gas. I needed a way to cross-reference the production and escrow data over a significant period of time.

My editor sent me to an intensive, weeklong training in computer-assisted reporting at the Investigative Reporters and Editors headquarters in Columbia, Mo. With the training, I built a database of production numbers and escrow deposits for 18 months, using data I obtained through records requests. I wrote a query that found an average of 30 percent of accounts did not receive deposits for months when the corresponding wells produced gas.

State officials initially posited that there were legitimate reasons for the discrepancies, and only admitted problems after I pointed out cases where companies never filed the necessary paperwork for royalties to be escrowed. The two corporations that dominate Virginia’s gas industry have combined to deposit more than $1.1 million into accounts I identified as missing payments. Recently, I discovered that some accounts that should hold royalties have never been created.

The other major piece to the reporting was exploring the human dimension of the story. I drove more than 2,000 miles to interview landowners who had never been paid for their gas. Their stories were an important ingredient in the narrative glue, and gave the series much of its emotional force. The initial eight-day series, and 20 subsequent stories, prompted lawmakers to pass legislation designed to release the millions in escrow to landowners, while continuing to raise questions about what is missing from the accounts.