Attorney General sues Chesapeake Energy for ‘deceptive’ gas leases

• Marie Cusick
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  Marie Cusick was the Harrisburg reporter for StateImpact Pennsylvania.

State Attorney General Kathleen Kane’s office filed a lawsuit Wednesday against Chesapeake Energy, seeking millions of dollars for Pennsylvanians who leased land to the company for fracking.

The Oklahoma City-based driller is one of the most active in Pennsylvania. It was an early adopter of fracking and touts itself as the nation’s second largest producer of natural gas. It’s also been widely accused of unfair business practices– including using below-market gas prices, making improper deductions from royalty payments, and misreporting gas production data.

Kane spokesman Jeff Johnson says the lawsuit could affect more than 4,000 Pennsylvania landowners who signed leases with the company.

“It could conceivably be in the tens of millions of dollars,” he said.

Chesapeake Energy spokesman Gordon Pennoyer called the allegations “baseless” in an email to StateImpact Pennsylvania. He said the company, “will vigorously contest them in the appropriate forum.”

Chesapeake is currently defending similar lawsuits related to royalty underpayment in at least half-a-dozen other states. It has also been subpoenaed by the federal Department of Justice and U.S Postal Service for information relating to its royalty payment practices.

Kane’s office filed the lawsuit Wednesday in Bradford County Court, where Chesapeake conducts most of its Pennsylvania operations. It accuses the company of violating the Unfair Trade Practices and Consumer Protection Law. It alleges the driller engaged in deceptive practices–promising landowners royalty money it never paid.

As StateImpact Pennsylvania has previously reported, Chesapeake has been accused of self-dealing, by using affiliated companies to charge exorbitant fees for processing and transporting gas. These fees were passed along to landowners, as deductions from monthly royalty checks.

Kane began investigating the company in early 2014, at the behest of former governor Tom Corbett and state senator Gene Yaw (R- Bradford).

The AG’s office also filed an amicus brief in federal court, urging it to reject a settlement agreement Chesapeake had reached with landowners in a separate class action lawsuit over royalties.

Read a the attorney general’s lawsuit here:

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