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Pennsylvania Landowners Resisting Arbitration in Another Chesapeake Royalties Lawsuit

Hundreds of landowners from Northeast Pennsylvania asked a federal court this month to deny motions filed by Chesapeake Energy Corp., Anadarko Petroleum Corp., Williams Partners LP and other companies to arbitrate their antitrust claims outside of court and dismiss parts of their complaint.

The case, which pits more than 300 landowners in Bradford, Sullivan, Susquehanna and Wyoming counties against the companies, was filed in the U.S. District Court for the Middle District of Pennsylvania roughly a year ago.

It alleges that the companies conspired to "reduce, restrain or eliminate competition for gas and mineral rights, operations rights and gathering serves in multiple counties in Northern Pennsylvania." The "anticompetitive conspiracy," the plaintiffs claim, allowed the defendants to deduct "artificially inflated" post-production costs from royalty payments.

In briefs filed on Wednesday, the plaintiffs said the arbitration agreements in the Chesapeake leases "expressly limit" disputes to those between a lessor and lessee. They argue that none of the non-signatory defendants named in the case are lessors or lessees and can therefore not be parties to arbitration. Plaintiffs requested that any claims the court finds arbitrable should be stayed so litigation can proceed for those remaining.

The case is the latest in a long line of accusations against Chesapeake in particular, which has already waded through litigation, arbitration and major class action settlement cases to resolve similar claims in Pennsylvania and across the country.

The Pennsylvania Attorney General's (AG) office filed a lawsuit against the company and some of its subsidiaries in late 2015, accusing the companies of unfairly deducting post-production costs such as those for compression, dehydration and transmission. Anadarko was later added to the lawsuit when the state accused the companies of allocating certain properties for the acquisition of leases that the AG’s office claims resulted in lower bonus payments and violated the Sherman Act and the Federal Trade Commission Act. That case is still pending in state court.

Chesapeake has repeatedly said that its gas is in marketable form at the wellhead, arguing that state law allows it to recover post production costs.

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