Ohio couple files arbitration complaint against Chesapeake Energy over unpaid royalties

Started February 10, 2017 at 02:48 pm by @Barry D in Marcellus Shale

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Barry D
02/10/17 02:48:48PM

For you here on this site, you know this to be a familiar claim.

Attorneys for a Columbiana County couple have filed an arbitration complaint against Chesapeake Energy and others that they say is the most comprehensive statement of royalty underpayments to date.

The 60-page arbitration complaint, filed Jan. 27 with the American Arbitration Association on behalf of Ronald and Joetta Hale, of Lisbon, Ohio, alleges Chesapeake Exploration, Total E&P USA Inc., Chesapeake Energy Corporation and Chesapeake Operative LLC have underpaid the royalties due the Hales for wells in both Columbiana and Carroll counties.

The Hales have two oil and gas leases with Chesapeake Exploration. The Carroll County well started to produce oil and gas in February 2014 and the Columbiana County well went into production in October 2015.

Owed $9.8 million

Using sale price figures reported in Chesapeake’s quarterly and annual reports filed with the U.S. Securities and Exchange Commission, and composite prices from the U.S. Energy Information Administration, the complaint alleges that by June 30, 2017, Chesapeake will have underpaid more than $9.8 million in royalties to all leaseholders on both wells’ oil, gas and natural gas liquids production, including derivative revenue. The Hales are owed, the complaint alleges, a portion of that total.


02/10/17 03:00:07PM @joseph-ohio:

Hard to keep reading about contracts (leases) that are written and entered into in order to preclude wasting time and money in court argument and ultimately ending up there anyway.

Don't you agree ?

02/10/17 03:20:38PM @gotgas:

Philanthropy, Fraud and Market Manipulation, come on Chesapeake! Of course if the worse consequence one can expect to see if restitution, that isn't much of a drive to change is it.

02/10/17 08:25:45PM @joseph-ohio:

Philanthropy ? Hmmmmm.....something to do with werewolves or what ? ? ? ! ! ! ? ? ?


02/10/17 08:35:58PM @gotgas:

despite the generosity he was still estimated around $500 million. As Barry Manilow says "looks like we made it". 

02/10/17 05:06:39PM @jon7:

Good luck!

bo  boboski
02/10/17 05:49:29PM @bo-boboski:

I wonder what the process was for them to decide who to do it to? It will be in court for 5/10 years,lawyers will make out big time. They under pay $10 million, settle out of court years later for $6 million. That's a $4 million profit! Plus get to use the money for all them years before they have to pay. Good business,I suppose,in their eyes. No one to stop them until JAILTIME comes into the picture.

02/10/17 08:22:34PM @gotgas:

Gotta wonder, was McClendon in the gas business or was the gas business just a hobby farm for the 200 million dollar hedge fund. 

02/11/17 01:53:47PM @joseph-ohio:

Where does the 'Philanthropy' come in ?

Are you referring to the lessor as the 'philanthropist' ?

Who is giving away money here I wonder ?

02/11/17 06:06:23PM @gotgas:

The former Ceo. Unfortunately though, if this article in the post is accurate, the Lessors will also end up unwillingly giving some away or be burdened with fighting legal battles for several years. Very sad that with the money these companies make, landowners are left vulnerable.


02/11/17 07:20:08PM @joseph-ohio:


02/11/17 08:57:28PM @dott:

Just curious.  Do you think any Lawyers work on a contingency basis? Meaning if you don't win the royalty case against big oil they get nothing but if you do then they will get paid. It seems to me that it would be a win win for all. I can see some O & G owners would not want to bring a lawsuit over royalties because of the expense of a Lawyer and what if they lose.

frank speaker
02/15/17 06:36:07PM @frank-speaker:

So lets say the landowner thinks he's been cheated out of $12million. He gets a lawyer and sues. Years later, the O&G settles for $6 million. The attorneys take $2million plus $1 million in expenses. The landowner gets $3 million, and pays taxes of about $1 million. Everybody wins!

02/12/17 05:05:35AM @joseph-ohio:

Lots of ways to skin the cat but keeping from being the cat that gets skinned is still the biggest problem seems to me.

02/13/17 11:14:59AM @gotgas:

I completely agree with you. Do you think things like subjective production costs, fluctuation in the market prices, unknowns of whether they will drill and fear of being cheated will nudge more landowners to consider selling rights vs leasing them?

Perhaps this is one way to protect the cat.

02/13/17 02:04:23PM @gh:

I have always thought sell some and keep some is not a bad way to go, in whatever proportion you are comfortable with.  I know many are very steadfast in advising not to sell, however, the selling is guaranteed money, so if you can get a price you are happy with I think it's not a bad strategy to sell some and keep some.  Get a lump sum for selling a part, but still receive royalties if/when they come.  Just my opinion.

02/13/17 11:54:52AM @joseph-ohio:

@gotgas :


Have often thought that may be the exact reasoning / impetus behind all of the seeming discourse between Lessees and Lessors (if we can believe the many horror stories as told by many Lessors / Landowners commenting here).

02/13/17 12:21:18PM @joseph-ohio:

Thinking more instances of Eminent Domain seizures may be seen in the future too.

Wondering along with many I assume brother.

02/13/17 01:18:11PM @gh:


Just saw this today - PA landowner who won against CHK in arbitration.  Got all deductions back, however, arbitrator did not agree that CHK was intentionally selling gas for less than market price.

02/13/17 01:59:25PM @joseph-ohio:

Somewhat encouraging; but, still jaundiced; as it seems to me that four (4) years locked in argument over obvious points of order within a clear contract is a long, long time.

Also wondering how much of the 'recovered' money went to the Accountant Lessor's Legal Representation ? Thinking you can lose even if you win.


02/13/17 02:00:12PM @gh:

Sure, it's not perfect.  Contract should have been honored as-written from day one. Step in the right direction, though.  Maybe CHK had to pay significant portion of the lessor's legal fees since the lessor ended up being mostly/partially correct?  

02/13/17 03:46:27PM @jon7:

Or they hope that you don't notice that they're deduction too much so you're basically loaning them money. If you do realize it and it's worth while to take action against them and win, they still may end up better of than having paid you the right amount in the first place. It's very unfortunate.

02/13/17 05:16:16PM @gh:

Yep.  I'm not disagreeing with you or Joe Ohio.  I just found this article to be a bit of hope for those with issues.  There shouldn't be issues in the first place though.

02/13/17 08:14:39PM @joseph-ohio:

And thank you for sharing it with all of us @gh.

02/13/17 02:06:59PM @joseph-ohio:
Hoping the Accountant Lessor didn't end up the 'skinned cat' after all of that !
02/13/17 02:08:51PM @gh:

Ha.  Article makes it seem like he was pretty happy.

02/13/17 02:29:39PM @joseph-ohio:

I guess I've got Media Trust Issues too !

02/13/17 08:27:55PM @gotgas:

Another interesting challenge and victory just posted today in the Wyoming County Group/GMS.  PA man challenged a $5000 monthly deduction and Chesapeake reimbursed him via Arbitration. Seems like a normal day in the field for them. No fraud, no problem, just an oops and here is your check.

I tried to copy the thread and paste it but was unable.

02/13/17 08:31:33PM @gotgas:

Reply to self, sorry, that was the same story posted by gh. Got trigger happy on the keyboard.

Edifying the Needful
02/15/17 07:58:33AM @edifying-the-needful:

What middle class America needs to know.  Obama spent 8 years trying to destroy America, and now he and George Soros are creating an American affiliate of the Muslim Brotherhood, a terrorist organization, that flies under the name Organization for Action.  Alt-left media, CNN, NY Times and Washington Post are doing their best to distract Americans from these facts...

02/15/17 04:29:20PM @raymond-bauman:

WE used to call the McClendon types Promoters because all they  did was take other peoples money , and sometimes produce for a while.   So lets call dishonest oilmen what they are PROMETERS and not insult the good with the bad.  The probles is the same in all parts of business today. What was done with a handshake and a simple written agreement is now drafted by lawers to make it easy to cloud the meaning of the agreement.  And the only winners are the lawers.  Maybe landowners should ask that the leases be voided for fraud ulant activity it will only take a few cases to strighten out the promoters.




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