The Pennsylvania Attorney General’s Office reached a $5.3 million settlement agreement with Chesapeake Energy.
Attorney General Josh Shapiro announced the settlement March 8 at a press conference in Wyoming County. The settlement agreement brings to a close a case that started in late 2015, when the Pennsylvania Office of the Attorney General filed a complaint against Chesapeake Energy.
The complaint alleged that Chesapeake “engaged in unfair and deceptive business practices in securing natural gas leases and in its improper payment of royalties to Pennsylvania landowners.”
“The bottom line here is that this settlement will end the abuse from Chesapeake and allow landowners to take a new lease with no deductions,” Shapiro said, in a statement. “This case is about standing up to powerful interests when they try to take advantage of people.”
Agreement terms
Under the agreement, Chesapeake has to pay landowners $5.3 million in restitution. The company must also give landowners the opportunity to get better lease language and stop offering leases that contain “market enhancement” clauses or “ready for sale or use” clauses in Pennsylvania. Market enhancement clauses allow companies to deduct post-production costs from royalty checks.
Landowners will receive a payment of either $367 or $700, depending on the language of their lease. The settlement applies to landowners in nine counties across northeastern Pennsylvania.
Chesapeake also must pay the Pennsylvania Office of the Attorney General $350,000 for its costs and fees from the case. As part of the settlement, an ombudsman will be hired to respond to landowner complaints.
Case history
Then-Attorney General Kathleen Kane filed suit in late 2015 after an investigation into landowner complaints that they were being cheated out of royalty payments.
The case went all the way to the Pennsylvania Supreme Court, which conducted oral arguments in May 2020.
Chesapeake, based in Oklahoma City, filed for bankruptcy in June 2020, and the bankruptcy court issued a stay on the state Supreme Court case. The company emerged from bankruptcy in February.
The bankruptcy court in Texas still must approve the settlement agreement, which could take a few months. The Office of the Attorney General said it anticipates landowners will get their restitution checks within six months of the effective date. The office set up a Frequently Asked Questions page for landowners.
The Attorney General is still moving forward with a similar case against Anadarko Petroleum.
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