The drilling rights to an estimated 13,000 acres in New York’s Southern Tier will be released and litigation dropped as part of a major settlement reached Monday by Chesapeake Energy Corp. and about 200 landowners.

The agreement officially ends a three-year legal struggle over landowner mineral rights held by Chesapeake and operating units that originally had been set to expire in 2010. Chesapeake indicated in August that it would not extend the court fight (see Shale Daily, Aug. 8).

The producer over the past three years had attempted to extend many of the leases, some of which had been in place for more than a decade, on the grounds that the de facto moratorium to drill using hydraulic fracturing in New York was beyond its control and, therefore, a force majeure. Landowners in Broome and Tioga counties originally sued to have the leases annulled, and the court two years ago agreed (see Shale Daily, April 11, 2011).

A settlement last year with the New York Attorney General allowed more than 4,400 New York landowners locked into leases with Chesapeake to have the right to renegotiate/drop their contracts (see Shale Daily, June 15, 2012).

Chesapeake secured some of the original mineral lease agreements in New York at prices below $5.00/acre, but most of the leasing was done before the Marcellus and Utica shales were being developed on a grand scale. Some landowners had wanted to renegotiate the leases in question, but at higher prices, a source last month told NGI’s Shale Daily. Many of Chesapeake’s leases in New York won’t be dropped because they have automatic lease extensions.

“This is a great victory for our landowners,” said plaintiffs’ attorney Cindy Manchester. “Our clients achieved the right outcome by working together in an impressive collaborative effort.”