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Permalink Reply by 1kw6x71km1v37 on November 26, 2013 at 15:55

State and federal governments have allowed havoc to reign in royalty payments. Specifically the Bureau of Indian Affairs was not watching the hen house. Occasionally there have been some huge awards related to such negligence, mostly brought about under the whistleblower statutes. So this is an old hat trick for E&P's.

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Permalink Reply by bullbayou on November 27, 2013 at 14:56

Ann...............Skip Peel's reply to you was not exactly accurate.  He was right in saying class status is impossible on this issue.  Too many variables.  Where he is wrong, is saying those without a "no deduct" clause have no cause of action.  That is just plain wrong!!  CHK is doing so many things that are "questionable at best" that the Attorney General and Justice Department should become aware of what is going on (since the State of Louisiana is the entity getting screwed the most out of all of this.............by way of the severance tax issue). 

The first questionable thing CHK does is sell the gas to CHK Energy Marketing Inc. at the wellhead.  What this does is allows CHK Energy Marketing to ignore all "no deduct" clauses in the OGL's since the OGL is not with CHK Energy Marketing.  I have no idea if that is legal or not, but it smells real bad to me!!  I don't think CHK would want to argue that point in front of a jury!!

The second questionable thing that happens is CHK Energy Marketing sells the gas to the end buyer for 40 to 60 cents less than any other operator in the Haynesville Shale.  There is plenty of wishy washy stuff going on there, but appears to be hard to prove because of how complicated they make it seem.  But nevertheless, it is fishy and morally wrong!!

The third questionable thing that happens is CHK Energy Marketing is charging additional costs (other than usual transportation, marketing, gathering) that seems unimaginable!!!  They are going to get away with it until someone calls their hand on it, and that someone needs to be the Justice Department of the State of Louisiana.  So even though you may not have a "no deduct" clause, you are still getting screwed!!!  And you can do something about it!!

All of this adds up to CHK paying $1.40 to $1.70 less than all other operators in the Haynesville Shale.  The Louisiana State Legislature needs to be aware of this.!!!

So here is what everyone needs to do:  If you cannot afford to sue CHK, call or write to your legislator and senator and get them to change LA Statute RS 31:212.31, which does not require oil and gas operators to show all deducts on the royalty check stubs.  This would get the ball rolling.  If this statute was changed requiring all deductions to be shown on royalty check stubs, then hundreds of thousands of royalty owners would know they are getting screwed!!  And then the Justice Department would HAVE to get involved!!!

At some point, CHK has to be stopped, or all operators are going to see CHK is getting away with this and are going to start doing it too!!!

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Permalink Reply by Skip Peel - Mineral Consultant on November 28, 2013 at 4:55

There is no cause of action in a court of law which is what cause of action means as opposed to there's nothing that can be done.  CHK sold its Haynesville gathering system to Access Midstream Partners, December 2012.  The Office of the Attorney General has been contacted I believe multiple times in regard to the issue of deductions.  The legislature is a possibility but a slim one for a well organized and financed lobbying campaign.  A grass roots effort would be a Hail Mary indeed.

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Permalink Reply by BOB on November 27, 2013 at 13:37

Yes, Because they have stop sending us payment all together here in Shreveport-Bossier.

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Permalink Reply by Greedy Landowner on November 28, 2013 at 14:46

Chesapeake is the achille's heel of the positive energy behind natural gas as to a legitimate energy source for our country. It is a greedy, slime coated corporation. Sooner or later it will get what it deserves. The right news organization gets the right story about how a minority population was exploited by this monster and the fall begins. Eric Holder will salivate when he gets it. None of us get to act the way that they have for very long.

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Permalink Reply by Henry on November 29, 2013 at 1:00

IRieley,

Only those with the deepest of deep pockets could afford to take CHK on over this issue.  CHK is making a fortune with this scheme.  Think of it - they are making roughly $1/mcfe on YOUR gas.  This might be the difference, at today's prices, of being profitable or not on a well.  Multiply this $1/mcfe times all of their production around the country, and, well, you get the idea of how much money it is.

On the other hand, a landowner is being nickeled and dimed to death.  So the return to him on any lawsuit isn't that much, in the grand scheme of things.

Given that, this is something CHK will fight to the bitter end in court.  They will drag the case out, throw up every legal obstacle, and force any plaintiff's legal bill into the stratosphere.  The legal bills will quickly exceed any potential judgement.  From first-hand experience with these guys, I can tell you they are pros a doing this.  I don't think any small group of landowers can afford to take this on.  

Louisiana does not allow for punitive damages.  So the only hope for a landowner to take this on, would be in a state that allows for punitive damages.  A long shot.

IMHO, your only hope is to get the Attorney General on board, and have them see if this is entirely legal. I have no idea if it is or isn't, but the AG is likely the only one with the deep pockets to pursue this.

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Permalink Reply by olddog573 on November 29, 2013 at 1:16

Wait till you have multiple wells with CHK and they pay you different on each one.  All of which are $0.70/mcf to $1.00/mcf less than your wells with Samson that are sitting within eye distance of each other.  

I felt the same way as you did but decided I wasn't going to lose any sleep over it.  While it is wrong and underhanded I don't have the money or patience to take on CHK.  

Actually I'm waiting on the price of gas to go up so CHK can come back and drill more because Samson has already shut in one of my wells because they didn't have the budget to drill another well to hold the unit.  

In closing, I'll take CHK over nothing any day.

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Permalink Reply by Steve on November 29, 2013 at 2:39

Get your legislators involved. If enough people call his/her office he/she will have to respond. They need an issue to become a local hero. Also, they will have more luck with the AG's and Governor's office than a single citizen. Get your local TV news and newspaper to do a feature investigative report on this and tell them to demand a response from Chesapeake. CHK will hate their investors and the stock analysts hearing more bad publicity about the. You should start a Chesapeake discussion about CHK's bad ways on the other Shale blogs too, like the Utica and Marcellus and Eagle Ford forums. This would be a good lesson for any other operators out there that want to get cute.

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Permalink Reply by Henry on November 29, 2013 at 3:29

I agree with Steve, but I think it has to go further.  Someone (not me) must take this on as a full-time mission.  Start up a web site with a catchy name, say, something like "chesapeakecheatsme.com."  Outline the anecdotal evidence from several landowners as to how their CHK gas prices are much lower than that paid from other companies.  Ask people to sign up in protest.  Gather up a thousand names, present them to the president and/or board of CHK.  Threaten that if the issue is not resolved by some future date, each of these 1000 people will contact their state's attorney general.

Don't limit yourself to Louisiana.  Don't assume every CHK royalty owner knows he's getting a bum rap.  I would bet that 90% of the CHK royalty owners are clueless about this.  You will have to take out ads in the Shreveport Times, and all newspapers relevant to the various formations where CHK drills (Marcellus, Utica, Barnett, Eagle Ford, etc).  Get the money by asking everyone who signs up to your web site to contribute $20.

Flood the email account of Chesapeake's president with emails from every person who thinks he is being screwed.  (If I recall, Chesapeake's email addresses go as first.last@chk.com.)  Flood the members of the board of directors also.  Ultimately, every single person must be willing to back up their letter by contacting the AG.

Good luck.

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Permalink Reply by bullbayou on November 30, 2013 at 4:15

All of this sounds fine and dandy, but until someone has the time and will to organize a revolt nothing will probably happen!!  I wish I had the time!!  But this should not be that difficult, because the ultimate victim in all of this is the State of Louisiana.  And we are all citizens of the state.  So everyone is a victim!!  The State of Louisiana is losing hundreds of millions of dollars to CHK because of the severance tax issue alone.  When Skip Peel says the AG has looked at this and blessed it or whatever he said, I say BS!!!  When it comes to hundreds of millions of dollars, somebody WILL get interested!!  Everybody (including the State of Louisiana) has a cause of action against CHK IN THE COURT OF LAW and its called FRAUD!!  I cannot understand why the originator or whatever of this website (or any other person with just a little stroke) has not done a story with a TV station or the TIMES over this matter.  This is worth hundreds of millions to the state and all I hear is crickets!!

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Permalink Reply by Skip Peel - Mineral Consultant on November 30, 2013 at 5:16

Instead of calling BS, why not contact the AG's office yourself.  It's fine to be passionate about a cause but without some understanding of the political and legal dynamics, financing and leadership a grass roots consumer crusade will go nowhere on this issue.  Henry, is correct if not a little overly optimistic IMO with the statement that 90% of CHK lessors are clueless. 

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Permalink Reply by 1kw6x71km1v37 on November 30, 2013 at 6:21

Ninety per cent are clueless, and the  other ten percent or lessors are basically impotent on these issues. So probably not a whole lot is going to happen other than a continuation of the status quo. The AG doesn't give a flying chuck roast or he would have been in the game long ago.

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