State Attorney General Kathleen Kane’s office confirms it is looking into allegations of fraud against Pennsylvania’s biggest natural gas driller, Chesapeake Energy.
First Deputy Attorney General Adrian King tells StateImpact Pennsylvania the office received letters last week from state senator Gene Yaw (R- Bradford) and Governor Corbett asking for an official inquiry into allegations the company is cheating landowners out of gas royalty payments.
“We’ve put together a work group. What we’re doing right now is collecting information,” King says. “We’re looking at it very closely.”
The Oklahoma City-based company has faced similar accusations around the country.
Pennsylvania’s Guaranteed Minimum Royalty Act requires oil and gas companies to pay a minimum 12.5 percent royalty to landowners who lease their property for drilling. However, companies are allowed to charge landowners for the costs of processing and transporting gas.
These royalty deductions– known as gathering fees or post-production costs– are legal in many cases. However, Chesapeake has been accused of skimming more than other companies, selling gas to itself, misreporting production data, and violating lease terms that explicitly prohibit the deductions.
“If there’s fraud we’ll take appropriate action, but it’s a little too early to say,” King says. “At an appropriate point we’ll meet with the Marcellus Shale Coalition and Chesapeake Energy.”
The company has repeatedly declined to comment on the allegations, but its CEO, Doug Lawler, replied to Corbett’s letter on Monday.
“We take your stated concerns seriously,” Lawler wrote. “Chesapeake is aware of questions regarding royalty payments in Pennsylvania, and we are working diligently to respond to these inquires.”