Thursday, December 29, 2011

'Business as usual' by big energy company, hiding its leasing, angers Mich. farmers denied bonuses

An investigation by the Reuters news service has found that Chesapeake Energy Corp., the No. 2 natural-gas driller in the U.S., used shell companies to conceal its role in a big gas play in rural Northern Michigan, and has since voided the deals, leaving farmers without the bonuses they expected.

"Chesapeake's effort to hide its involvement isn't illegal," Joshua Schneyer and Brian Grow report for Reuters. "To the contrary, the company's maneuvering exemplifies how U.S. corporations routinely can conceal financial and corporate transactions through the use of shell companies. President Barack Obama has called on other nations to improve corporate transparency, but under state laws governing corporate formation in America, privately held businesses aren't required to disclose the individuals or companies who really own them."

Grow and Schneyer note that the Chesapeake website advises landowners that their "main consideration" in leasing should be "to discover who will ultimately be producing your minerals." However, "Chesapeake's strategy made that extremely difficult for the Michigan landowners," they note.

Joshua Fershee, a contract law professor at the University of North Dakota, told Reuters that Chesapeake's tactics "raise moral and ethical questions about how entities can be used," but John Lowe, a professor of energy law at Southern Methodist University, calls it "business as usual" in the oil and gas industry. If large companies are known to be interested in leasing, that tends to drive up lease prices. (Read more)

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