"Chesapeake Energy Corp. has signed its name to a $7.5 million settlement
with Pennsylvania landowners alleging that the natural gas producer
underpaid royalties to leaseholders," Joel Kirkland reports for Environment and Energy News. "The proposed settlement came as a surprise late Friday, arriving a
couple of hours after a class-action lawsuit was filed against
Chesapeake in U.S. District Court in Scranton, Pa. The suit charged that
the state's largest gas producer has been slashing royalty payments
agreed to in lease contracts by improperly deducting the cost of moving
gas from the wellhead to gas hubs, processing plants and interstate
pipelines."
The lawsuit "also alleges that Chesapeake Appalachia LLC, the regional subsidiary of the Oklahoma City-based gas giant, has based royalty payments on the sale of unprocessed gas at below-market prices," Kirkland writes. In June the The Herald of Sharon, Pa., reported that the Pennsylvania Farm Bureau found that Chesapeake Appalachia was sometimes deducting as much as 88 percent of the royalty payment from landowners in the Marcellus Shale region.
"The underlying issue revolves around a 'market enhancement' clause in Chesapeake's leases. It prohibits deductions for gas gathering and processing, unless the company decides those costs 'enhance' the gas before selling it into the larger market," Kirkland writes. "Under the proposal, Chesapeake would pay 55 percent of post-production costs that was deducted from royalty payments in the past. In the future, the settlement bars Chesapeake from charging leaseholders 100 percent of post-production costs." (Read more)
The lawsuit "also alleges that Chesapeake Appalachia LLC, the regional subsidiary of the Oklahoma City-based gas giant, has based royalty payments on the sale of unprocessed gas at below-market prices," Kirkland writes. In June the The Herald of Sharon, Pa., reported that the Pennsylvania Farm Bureau found that Chesapeake Appalachia was sometimes deducting as much as 88 percent of the royalty payment from landowners in the Marcellus Shale region.
"The underlying issue revolves around a 'market enhancement' clause in Chesapeake's leases. It prohibits deductions for gas gathering and processing, unless the company decides those costs 'enhance' the gas before selling it into the larger market," Kirkland writes. "Under the proposal, Chesapeake would pay 55 percent of post-production costs that was deducted from royalty payments in the past. In the future, the settlement bars Chesapeake from charging leaseholders 100 percent of post-production costs." (Read more)
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