After years of court fights, Chesapeake Energy will pay $5.3 million to landowners who say they were cheated out of natural gas royalties.
Under the settlement with Pennsylvania’s Attorney General, landowners will get paid either $367 or $700, depending on their type of lease.
That’s disappointing for some owners who believe they are owed tens of thousands of dollars or more.
“I don’t think anybody’s going to sit with a chair out by the mailbox waiting for that,” said Jackie Root, membership director for the Pennsylvania Oil and Gas Landowner Alliance.
AG Josh Shapiro acknowledged the settlement is not the “full victory that landowners deserve” during a news conference Monday, according to the Pittsburgh Post-Gazette.
Landowners will also be able to change some terms of their leases, which is notable, according to Ross Pifer, the director of the Center for Agricultural and Shale Law at Penn State Law.
He said it’s rare for a leaseholder to get the chance to renegotiate, though it remains to be seen what each person will get from it.
For example, he said, if a landowner feels like they already missed out on substantial royalties and are not likely to get royalties in the future, then this agreement isn’t providing much relief for them.
The settlement must get approval from a bankruptcy court judge in Texas. Chesapeake filed for Chapter 11 bankruptcy in June 2020.
Then-Attorney General Kathleen Kane sued Oklahoma-based Chesapeake in 2015 for allegedly using deceptive tactics to secure natural gas leases.
Chesapeake took the case all the way to the state Supreme Court, which heard arguments in May 2020.
Though the company has restructured, an injunction is keeping Shapiro’s office from seeking the full restitution it says Chesapeake owes.
In a statement, Chesapeake said it is pleased to have reached a resolution that addresses landowners’ concerns and looks forward to working with landowners going forward.
Chesapeake also recently finalized settlements for two class-action suits with similar deceptive lease claims for a total of $6.25 million.
Root noted the settlement requires Chesapeake to drop a “market enhancement” clause in their leases, which allowed it to deduct the cost of preparing gas for market from royalties. Though the settlement only addresses Chesapeake, Root said she wonders if it could affect other companies.
“It is a statement about that market enhancement clause and how they were using it,” she said.
The AG’s deceptive lease case is still moving forward against another company, Anadarko Petroleum. If Shapiro’s office is successful, more landowners could see relief.
Under the direction of former Gov. Tom Corbett and state Sen. Gene Yaw (R-Lycoming), then-AG Kane started investigating Chesapeake Energy in early 2014. Her office said the resulting lawsuit could affect more than 4,000 Pennsylvania landowners who signed leases with the company. Anadarko was later added to the suit.
The AG’s office tried to argue the case under the consumer protection law. The Supreme Court has yet to rule on whether the AG’s office can use that law to argue this instance.
This story is produced in partnership with StateImpact Pennsylvania, a collaboration among The Allegheny Front, WPSU, WITF and WHYY to cover the commonwealth's energy economy.
