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Royalty Underpayment Alleged in Barnett Shale

October 5, 2010
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A Barnett Shale landowner is suing units of Chesapeake Energy Corp. alleging underpayment of royalties via a scheme involving gas sales to an affiliate at less than full value. The lawsuit seeks class action status.

"Instead of paying royalty based upon the full value of natural gas, inclusive of hydrocarbons processed and sold separately from the gas stream, Chesapeake Operating employs a scheme whereby the gas is first transferred to its gathering subsidiary, Chesapeake Energy, which ostensibly conducts the first true sale to a bona fide third-party purchaser," the lawsuit states.

"Chesapeake Operating is paid a fictitious price by its wholly owned subsidiaries, which is substantially less than 100% of the price received from the first bona fide purchaser and also substantially less than either the market value at well as the amount actually received by Chesapeake Operating."

The lawsuit, filed by landowner Robyn Coffey in U.S. District Court in Oklahoma City, said the potential class of plaintiffs numbers more than 1,000. A Chesapeake spokesman declined to comment to NGI.

ISSN © 2577-9877 | ISSN © 2158-8023
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