As some energy corporations add missing payments to a state-run escrow fund holding natural gas royalties, area lawmakers are seeking ways to distribute the fund’s $25 million to the people who own it.

Those millions belong to thousands of people who own mineral rights to property in Southwest Virginia, where the industry drained 128 billion cubic feet of gas last year. Gas operators pay royalties into escrow whenever they produce gas belonging to people they cannot find or whose mineral ownership is in dispute.

But retrieving the royalties from escrow requires mineral owners to sue to prove ownership, or split their royalties with someone else – generally a coal company – who also claims them, effectively trapping millions of dollars in escrow.

“The key thing that shouldn’t be lost is, we appreciate what the gas people are doing,” state Sen. Philip Puckett, a Lebanon Democrat, said in a telephone interview last week. “But we’ve got $24 million-plus sitting in escrow, and we need to be about fixing that.”

The escrow fund was created to facilitate the production of coalbed methane, a gas produced by fracturing and stimulating the coal seam, which now accounts for 80 percent of the natural gas produced in Virginia. Many Southwest Virginia landowners long ago sold their coal but retained the remainder of their minerals – creating a lingering conflict over coalbed methane ownership between the original mineral owners and the corporation that bought their coal.

The 1990 Gas and Oil Act allowed the state to force people to lease their mineral rights to private energy companies, and directed the companies to pay royalties into escrow when coalbed methane ownership was in dispute.

Coalbed methane royalties make up about 83 percent of the royalties in escrow, according to a recent state estimate. The rest belongs to owners gas producers cannot find.

In 2004, the Supreme Court of Virginia unanimously upheld a circuit court ruling that mineral owners who severed only their coal retained full rights to coalbed methane. But the Virginia Department of Mines, Minerals and Energy interpreted the high court’s ruling in Harrison-Wyatt v. Ratliff as applying to the specific deeds at issue, and the state has continued to direct gas producers to escrow coalbed methane royalties when different people own the coal and the gas for the same tract of land.

If mineral owners want to collect 100 percent of coalbed methane royalties, they have to go to court – a process that can take years, especially when the royalties at stake are substantial.

“Most of our people can’t afford to go to court,” said Puckett, who has repeatedly stated that mineral owners with severance deeds similar to the ones analyzed by the state supreme court should be able to collect their royalties without having to sue. He is working on legislation to “keep money out of escrow, and get it to the people who deserve it,” he said.

“In very simple terms, we’re trying to codify the Ratliff case,” said Puckett, who has requested that the Virginia Division of Legislative Services draft language to that effect. Such an amendment would incorporate the central finding in the Ratliff case that mineral owners who severed only the coal from their property own the coalbed methane.

State Delegate Terry Kilgore, a senior Republican lawmaker from Gate City, Va., supports the aim of Puckett’s proposed legislation, but is taking a different approach to reducing the barriers to accessing royalties in escrow.

“After some of the articles came out, I’ve spoken to two or three different legislators,” Kilgore said, referring to a recent series of Bristol Herald Courier articles on the escrow fund. “We believe there is a consensus that we’ve got to figure out some way to get [money from escrow] for those people who are entitled to it, and we need to figure some way of getting it out of there quicker,” he said.

Kilgore is eyeing legislation that would establish a third-party arbitrator to hold hearings on determining ownership of coalbed methane royalties. He compared his approach to systems already in place at the state’s Department of Rehabilitative Services and the Department of Medical Assistance Services, which would have an administrative law judge or hearing officer expedite the determination of ownership.

Kilgore has not yet submitted a request to the Division of Legislative Services, but plans to next week, he said.