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Chesapeake Energy Corporation's 50 acre campus is seen in Oklahoma City, Oklahoma, April 17, 2012. REUTERS/Steve Sisney
Chesapeake Energy Corporation's 50 acre campus is seen in Oklahoma City, Oklahoma, April 17, 2012. REUTERS/Steve Sisney

Attorney general files suit against natural gas producer Chesapeake and affiliates

The state attorney general’s office has filed suit against the nation’s second largest natural gas producer.

In the suit filed Wednesday in Bradford County Court, the AG’s office accused Oklahoma-based Chesapeake Energy Corp. and its affiliates of using “unfair and high-pressure sales tactics” to coerce Pennsylvania landowners to sign leases for oil and gas rights. The 65-page lawsuit also says Chesapeake failed to meet promises when it came time to pay royalties.

“This alleged conduct amounts to a bait-and-switch,” Attorney General Kathleen G. Kane said in a statement. “Pennsylvania landowners were deceived in thousands of transactions by a company accused of similar conduct in several other states.”

One Chesapeake spokesman decried the allegations.

“We strongly disagree with Attorney General Kane’s baseless allegations and will vigorously contest them in the appropriate forum,” Gordon Pennoyer, Chesapeake’s strategic communications director, said in an email.

The attorney general seeks restitution for landowners who allegedly suffered losses — $1,000 for each violation of the Unfair Trade Practices and Consumer Protection Law (UTPCPL), and $3,000 for each violation involving a landowner 60 years or older.

Related: Attorney general files royalties lawsuit against Chesapeake Energy

After a 2008 Penn State University study revealed that 50 trillion cubic feet of natural gas lies locked inside the Marcellus Shale formation, natural gas producers from around the country flocked to Pennsylvania and got caught up in a heated race to lease as much land as possible.

Scouts, called landmen, pushed hard to sign lease deals with landowners capitalizing on their ignorance to just how lucrative the industry soon would become, the suit says. Landmen carried file boxes in their vehicles containing boilerplate lease documents and computers with portable printers so they could tweak agreements and hurry along a deal.

Landowners were promised royalties free from “production costs” or expenses involved with preparing the gas for the market that the company would deduct from royalties payments.

However, landowners could share the expense of “enhancing the value” of the gas, the suit says, and faced with mounting debt in 2011, Chesapeake artificially inflated those costs using affiliate companies to do the work.

The suit claims the processing company, Access Midstream, acted as a cover for the scheme to pass post-production costs to landowners. Williams Partners LP, which bought the former Chesapeake processing company, is also named in the suit.

 

This article was written by Jon O’Connell from The Times-Tribune, Scranton, Pa. and was legally licensed through the NewsCred publisher network.