Chesapeake Energy Corp. has again reached a settlement with thousands of landowners in Pennsylvania, agreeing to provide $7.75 million to resolve claims that it wrongly deducted post-production expenses from royalty checks.
If approved by the U.S. District Court for the Middle District of Pennsylvania, the settlement would resolve cases filed in 2014. It involves about 10,000 landowners in the northeast part of the state, who alleged the company cheated them out of billions of dollars in natural gas royalties to cover marketing costs for things like compression, dehydration and transmission.
In addition to the settlement fund, landowners that choose to opt-in would have the choice of receiving royalties the same way they have under the current methodology or receiving them based on local index prices, according to the settlement, which was filed for approval last week.
Plaintiffs sought damages for racketeering, unjust enrichment and fraud, among other claims. The case was originally filed against former subsidiary Access Midstream Partners LP, which was sold to Williams in 2014.
Chesapeake and other operators have faced similar claims in the state and across the country, reaching settlements in some of the cases. In Pennsylvania, the attorney general (AG) is still pursuing a complaint against the company over post-production costs. The latest settlement includes a clause that would allow the company to withdraw from the settlement if the state doesn’t agree to drop its claims of unfair trade practices. The AG has rejected similar terms in the past.
A Chesapeake spokesperson said the $7.75 million lawsuit offers landowners an “unprecedented opportunity” to alter the terms of their lease by selecting a new formula to calculate royalties.