Energy. Environment. Economy.

As fraud allegations mount against Chesapeake Energy, so does frustration

Landowners who have been accusing natural gas driller Chesapeake Energy of stealing their money say Harrisburg is doing little to stop it.

Most of the company’s Pennsylvania operations are in Bradford County. It’s a rural area stretching along the New York border; it has more Marcellus shale gas wells than any other part of the state. StateImpact Pennsylvania first talked with landowners there in June 2013.

A year-and-a-half later, they say Chesapeake is still cheating them:

“Highway robbery”

“Gas companies have a great deal of money, high-powered lawyers,” says Janet Geiger. “If you grease the right hands, you get away with a lot.”

Before Janet and her husband Richard ever heard of the Marcellus Shale, the retirees leased the mineral rights under their 10 acres. They never thought much would come of it.

That’s proven to be true.

Every month they’re supposed to get a royalty check with their share of the money Chesapeake makes selling their gas.

“A few months ago Chesapeake kept 92 percent of our check,” says Janet. “You couldn’t print what I really think of the gas company. We’re not even getting enough to pay our property taxes. I think it’s highway robbery.”

Bradford County Commissioner Doug McLinko (R) has been hearing complaints about the company for nearly two years.

“I get approached at the grocery store, at the gas pumps, walking down the street, on my phone, on text messages—everywhere. All the time,” he says.

So what’s going on?

Chesapeake was an early adopter of fracking, which allowed it to unlock huge reserves of natural gas. But the glut of gas caused prices to crater, and the company nearly collapsed. Last year the company’s founder and CEO was pushed out amid revelations about questionable financial deals.

The $5 billion shuffle

A lengthy article published in March by the investigative news outlet ProPublica laid out how the struggling company managed to stay afloat– by allegedly gouging rural landowners.

According to ProPublica’s investigation, Chesapeake spun off some of its pipeline systems into a new company called Access Midstream– raising nearly five billion dollars.

Chesapeake then promised to send much of its gas through those pipelines for the next decade and pledged to pay Access enough in fees to repay the five billion, plus a 15 percent return on its pipelines.

That was only possible if Access charged Chesapeake significantly higher fees for moving the gas.

These are known as “gathering fees,” and Chesapeake passed them along to people like the Geigers, deducting them from their monthly royalties.

“We’ve gotten $710 from them for the entire year,” says Janet Geiger. “They’ve kept $1,500 and some.”

Chesapeake Energy and Access Midstream both declined to comment for this story.

After reading the ProPublica article, the Bradford County commissioners wrote to the U.S. Department of Justice asking for an investigation.

“I want to go on record saying I support developing the Marcellus Shale 100 perecent, unapologetically,” says Commissioner McLinko. “But that doesn’t mean we support every practice. That doesn’t mean we support every operator.”

Chesapeake recently disclosed it has been subpoenaed by the Justice Department. It was already under scrutiny in Pennsylvania.  Earlier this year Governor Corbett asked state Attorney General Kathleen Kane to look into the company, but her office has repeatedly declined to discuss the status of the investigation.

Meanwhile Chesapeake has tried to change its image. A new CEO cut costs, laid off employees, and sold acreage.

But retiree Terry van Curren doesn’t expect much from the company’s makeover. He lives down the street from the Geigers and has also seen most of his royalty money get eaten up by fees.

“I never believed we’d get much money,” he says. “But I didn’t think they’d actually steal it from us. And I didn’t think the state would stand by and allow that to happen.”

“Fundamental fairness”

A 35-year-old state law known as the Guaranteed Minimum Royalty Act requires oil and gas companies to pay a minimum 12.5 percent royalty.

But with such high gathering fees, some landowners say they’re getting far less.

A bill introduced last year by state Rep. Garth Everett (R- Lycoming) aims to keep gas companies from charging such high fees.

He says many companies treat people fairly– but some don’t. He doesn’t think Chesapeake is the only bad apple.

“There are many, many of my colleagues—from even non-Marcellus areas—that agree with the fundamental fairness that our landowners should be paid that minimum royalty,” says Everett.

But the bill hasn’t gone anywhere.

McLinko has pushed hard for the measure. He’s particularly frustrated with the legislative leadership, including members of his own party, like House Majority Leader Mike Turzai (R- Allegheny).

“I saw [Turzai] on the street, handed him a map of the drill units, and tried to talk to him. Right there in front of the Capitol, he bolted away from me,” says McLinko. “They don’t want to hear it. It’s almost a waste of my gas and time to drive to Harrisburg to talk about it.”

Turzai (who was recently elected House Speaker) wouldn’t comment for this story. But according to a recent analysis by the nonpartisan government reform group Common Cause PA, Turzai ranks second among state legislators when it comes to taking gas industry campaign contributions. He’s accepted more than $272,000 since the drilling boom began.

The industry has lobbied heavily against the bill, calling it “a vast legislative overreach”, and arguing it’s unconstitutional because it would change the terms of contracts that have already been signed. However no one from the industry’s three major statewide trade associations (Marcellus Shale Coalition, American Petroleum Institute, and Pennsylvania Independent Oil & Gas Association) agreed to be interviewed for this story.

Back in Bradford County the as the Geigers look over their royalty statements, they keep a tally of the money they’ve lost so far.

They say they’re not hopeful things will change anytime soon, at least not in their lifetimes.



  • Jing Yagunazie

    the gas companies and the government know they will never pay out a dime to the land owner. Just ask an indian what its like. Same sanario, different victim.

    • Don

      Indians get a check every month of their lives. It’s why they never amount to anything.

      • Iris Marie Bloom

        This is a racist comment in addition to being ignorant and false. It should be removed.

        • Don

          It is fact. They get a check from the time they are born. No matter if they make millions per year, they still get the check. Ask an Indian if you are so uneducated that you were unaware. Go ahead and spend a little on an education.

      • north

        Indians are from the country India.
        Native Americans are from North America, which includes Canada, USA and Mexico.
        Your great founder Christopher Columbus seems to be a bit of an idiot and made a big mistake 500 years ago, and that name has stuck sadly. Had he never sailed to India the long way before?

  • mvogell

    How soon before someone gets really peed off and takes out a pipeline like they do in Africa or the middle east when their oil is being stolen by multinational companies? Maybe, after seeing how they screww over Americans we’ll be willing to possibly admit the savages might actually have a valid gripe with oil companies after all.

  • Mike

    What do you mean, Harrisburg is doing nothing? Do you realize how hard it’s getting to hide huge bribes?

  • FFighters of America

    This is also happening to my family in south Louisiana. It’s one of the biggest oil companies

    • Don

      Nobody should get that money. It’s way underground. It’s not yours. You didn’t pay taxes on the mineral rights.

      • Ed

        So…if it’s too far underground for the mineral rights/landowner to be paid for the extraction and sale, do you think the operators should receive 100%? Or are you saying the government should get all of the money?

      • north

        Yes they do dumb ass. In many areas of USA you own from the surface to the core of the earth. In the 1930s, due to the depression and wars, many mineral owners lost their ownership rights because they failed to pay their taxes, and the ownership reverted back to the current landowner (or was put up for tax foreclosure sale) Do some homework at your courthouse first before making these comments

  • Keith Waugh

    This is the kind of business that causes gas wells to go up in flames.

  • CE

    Ah, fracking. The gift that keeps on giving; the problem is- what and to whom?

    • north

      It’s giving you cheap natural gas to heat your homes and feed your families. It’s far cheaper than electricity

  • kitbag

    The injury to insult is he gas extracted from PA,USA will be moved to an east coast refinery and then sold to other countries at a higher profit than it would be sold for in the US .Regardless of ads on NPR and other news venues about the fleet of buses and trucks in US municipalities using nature gas to fuel their vehicles, implying the future/responsible green fuel will be nature gas, there is zero government subsidies being made available for meaningful development of the infrastructure necessary to make nature gas a common fuel for US automobiles/trucks. The automakers don’t seem to be on board either? Those in PA were like babes to the wolves and their state government, as always, are just caught up in the flow and greed of business as usual between government and corporate interaction. Not a new paradigm.

  • JD

    Who would have guessed…a guy who gets “paid” by the gas companies doesn’t want to hear complaints! SHOCKING, I say.

  • Awasis Crowley

    What do you expect, it’s a Republican controlled state.

  • JimBarth

    In May of 2008, when I first started to become active in opposing shale gas extraction in NEPA, I wrote to Senator Lisa Baker, and phoned her office. I spoke with Brian Grove, who was, I believe, her chief aide at the time. Speaking with him was the equivalent of speaking with a gas company public relations employee, and sure enough, within about 3 months he left the Senator’s office to become one of the main Chesapeake PR representatives for NEPA. I expect he is still employed by the company, or the industry. A certain Mr. Spiglemeyer (sp?), was V-P of governmental relations for Chesapeake, and now he is President of The Marcellus Shale Coalition. We all know how former top PA regulatory and governmental officials no longer work for the public, and have become employed directly by the shale gas extraction industry since extraction began in PA.

    The NY Times has published two articles in the past two days that show what has happened in the Bakken oil patch of N.D. Do we really think it will work differently in PA once the price of gas explodes, and export happens, thus creating a second rush a la early 2008?
    Here is today’s NY Times story. I found yesterday’s to have been more to the broader points of the “downside”. This one is specific to how the state government, and the corporations have screwed over landowners even in the relative absence of Chesapeake.

  • Teapubliturd Hater

    How’s that “Energy Independence” thing workin’ for ya?

    • brandon

      how do you enjoy sending your money overseas?…keep those big boys in saudi happy, arent ya?

  • john moyer, M. Ed.

    The oil & gas industry will not protect you.

  • Julieann Wozniak

    Chesapeake is doing the exact same thing in Northern West Virginia, except they’re countersuing the victims, according to the Dominion Post.

  • EKD

    Nowhere in this article does it speak about the lease that was signed.
    Some leases allow for the deduction of gathering fees. Only leases that
    specifically state that can deduct them. If allowed, the royalty then gets paid
    after the deduction. If these people signed that type of lease, then shame on
    them or their attorney for allowing that! If that clause is in the lease then
    CHK is doing nothing illegal. Only caveat is whether Access is owned by CHK. Access website says it is a partnership with Williams. If CHK owns Access then the gathering fees are fishy, unless Access can prove that the fees collected are to cover actual operating expenses to gather gas. I am an independent consultant and deal with these types of issues. EKD

    • Tony Inian

      You are correct. And ProPublica is a George Soros funded group of “journalists” whose job is to smear whomever/whatever Soros and his “progressive” friends don’t like.

      • Iris Marie Bloom

        ProPublica has more integrity than most media, for example the Philadelphia Inquirer whose publisher has connections to the pipeline industry. The only criticism of ProPublica is that it ran the confusing industry ad that made it look as if fracking is “green” when the science is in, and shale gas development cradle to grave is worse for climate than coal. It’s better when they stick to the science, and avoid accepting ad money from the industry they are reporting on.

    • dradshaffe

      I agree with what you are saying but we have gas wells in Jefferson/Armstrong County and CNX is deducting the ‘gathering fees’. They know it’s not worth hiring an attorney to fight. We wrote letters but got some BS letter from their attorney that said it’s ok.
      Just waiting until they need something and they are going to pay.

    • pat

      We are not arguing over the deductions cost, we are arguing over the 12.5 per cent the state of Pa. promised us, these leases deducting production fees should not have been legal in our state with the 1979 minimum royalty act which states we are to receive no less than 12.5 per cent. If we were to have someone sign a lease where the state said oh no you cant take anymore than the minimum it wouldnt be legal but bc the gas cos. pay everyone off its okay.

    • bbrezv

      It is true that were/are no attorneys in the state of PA who specialized in oil and gas law. The trusted “family attorneys” were either incompetent or in the pockets of the industry. It’s ironic but just that the Bradford County Commissioners (who red-carpeted the industry, then became major apologists for all the environmental and social damage that has been done to the area) are the ones who must now plead for justice for their constituents.

      • north

        FALSE statement. There are lots of Attorney

  • Johnnie


    Smells like the Mafia-Costa Nostra-Federal Judiciary- Keystone-The 3′rd
    Circuit. I don’t feel any sorrow for you people in Bradford
    County…NONE…..You have a known Mobster as your Federal Representive
    that is on the MAFIA Payroll and you elected him 2 times, once this
    month. The Mafia and the Judiciary are known Crooks and have been for
    over 100 years, they will steal your gas and your property…BECAUSE
    THAT IS WHAT THE MAFIA DOES FOR A LIVING and when the Judiciary and
    State Government is criminal you are dead.

    Poor Emil Wagner owner of Mount Airy
    Lodge got a bullet in the head when they stole his property “Suicide they
    say” look at the history of Oaktree Capital Suicide-Suicide-Suicide
    Suicide From New Orleans to Texas to California to Pennsylvania . these are
    PENNSYLVANIA; easy to find they are the ones with the robes.
    You are a victim of FRAUD in the highest degree and.

  • jerold wilson

    If the contracts states that the royalty owners have to pay their portion of gathering fees then that is legally binding. As long as the gathering fees are not excessive then these people are just SOL. You have to remember that the royalty owner is only responsible for the percentage of the cost based on their ownership & the operator pays the rest so if the fees are excessive then they are screwing themselves unless they own the gathering system. No way I would ever sign a deal that includes me as the royalty owner to pay any expenses on a well.

    • north

      Well said.
      You sign a contract/lease, you better get a lawyer to review and understand your rights. No one is complaining about the $2,500/acre bonus check they got for signing their lease originally. Large almost bankrupt Farmers who owned a lot of land became overnight millionaires off just the Bonus check alone.

  • Victoria Switzer

    it is not just Chesacheap that has stolen from the citizens who leased their land. OTHER gas companies lied, cheated and manipulated. Elected officials were so afraid the gas industry would go elsewhere they GAVE the state to them. We had prominent business people and elected officials bending over backwards for the gas company. It sickens me.

    • Iris Marie Bloom

      You tell it like it is, Victoria. Fascinating that Chesacheap was able to manage to come up with $26 million to pay national Sierra Club to keep their focus exclusively on coal while being “soft on fracking” for years… but they can’t pay their own landowners? And so many other companies do likewise but don’t make headlines doing it. Polluters are never straight shooters.

  • Steven E McKenzie

    This shouldn’t surprise anyone.

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