Bradford County commissioners ask feds to investigate Chesapeake Energy

  • Marie Cusick

A Chesapeake Energy rig in Oklahoma.

AP Photo/Sue Ogrocki, file

A Chesapeake Energy rig in Oklahoma. file

Bradford County’s three commissioners have reached out to the federal Department of Justice, seeking its help investigating allegations gas driller Chesapeake Energy is cheating Pennsylvania landowners out of royalty money.
As StateImpact Pennsylvania has previously reported, residents there have been complaining about the issue for more than a year and say they’re disappointed with what they view as a lack of action in Harrisburg.
“It’s still a travesty,” says commissioner Daryl Miller (R). “It’s still an issue that is hurting the working families and senior citizens of our county. As more wells go online, more people are aware of the problem because more people are getting royalty checks.”
Deductions from royalty payments– known as gathering fees or post-production costs– are legal in many cases. The fees enable companies and landowners to share the costs of processing and transporting gas as it moves from the well to the market.
Oklahoma City-based Chesapeake Energy has been accused of skimming more than other companies, selling gas to itself, misreporting production data, and violating lease terms that explicitly prohibit the fees. Most of the company’s Pennsylvania operations are located in Bradford County.
Chesapeake declined to comment for this story. The company has faced similar allegations and lawsuits in other parts of the country and at least two class action lawsuits in Pennsylvania.
Following requests by Governor Corbett and state Senator Gene Yaw (R- Bradford), state Attorney General Kathleen Kane’s office is actively investigating the matter but declined to comment.
In a letter to U.S. Attorney Peter Smith, the Bradford commissioners cite an article by investigative news outlet, ProPublica:

The article by ProPublica asserts that the reason for the steep increases in postproduction costs charged through to Chesapeake’s leaseholders is because Chesapeake, in an effort to raise cash to cover shortfalls, sold its local pipelines to a company spun off from Chesapeake, Access Midstream, and that the cost of transporting gas through those pipelines has increased dramatically beyond any reasonable approximation of actual market cost. If the allegations contained in the article are true, then there may be violations of state or federal law…

A spokeswoman for the U.S. Attorney’s office declined to comment on the commissioners’ request.
Pennsylvania’s Guaranteed Minimum Royalty Act of 1979 requires oil and gas companies to pay landowners a minimum one-eighth– or 12.5 percent– royalty. Some leaseholders say the company is violating the law by withholding too much in post-production costs.
Bradford County retiree and Chesapeake leaseholder Mary Jane Foelster, who was profiled by StateImpact Pennsylvania last year, says not much has changed.
“I still feel like someone came in and is taking something that belongs to me,” she says. “They’re still stealing my gas.”
In March, a state House committee approved a bill aimed at limiting the ability of companies to charge post-production costs. However it hasn’t moved any further in the face of strong opposition from the oil and gas industry, which regards the fees as a legitimate business practice.
“It’s outrageous they’re letting people get taken advantage of. The legislature hasn’t lifted a finger,” says Bradford commissioner Mark Smith (D). “It’s a fairly simple issue to fix.”
Read the commissioners’ letter to U.S. Attorney Peter Smith:

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