Chesapeake - Below Market Price Paid on Royalties to Louisiana Landowners

The situation with CHK is becoming worse each month. We are in several producing units, some of which are operated by CHK and others by BHP. Our lease is with BHP and provides for no deductions for treating, processing, gathering or transportation costs and that the price paid will be market price at the wellhead. This month's royalty check shows BHP paying $3.53, and CHK paying $2.05. This simply cannot be legal.

Logic says that one of two things is happening here: Either CHK is selling gas to an affiliated company for $2.05 and then reselling it on the open market at market price, or CHK is selling gas on the open market for $2.05, when the market is willing to pay $3.53. Only one of these two possibilities seems reasonable to me.

I realize that class action lawsuits are difficult to file in Louisiana. But, if there are other Louisiana landowners who are in this same situation and are interested in joining together to hire an attorney to look into this, please send me a message offline.

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1kw6x71km1v37Permalink Reply by 1kw6x71km1v37 on December 3, 2013 at 14:52

Discovery is enhanced if the lessor reserves the right to conduct a full audit of the operator regarding all aspects of the subject well, including backdoor sweetheart deals with unrelated parties. Also audit for gas processing fiscal year-end kickbacks paid to the operator.

Permalink Reply by jim weyland on December 4, 2013 at 6:35

Does the state of Louisiana have anything on the books comparable to the federal False Claims Act (of 1863)?

Permalink Reply by Francis Mayo on December 4, 2013 at 6:54

I can tell you from experience as a relator with a claim that could have utilized any existing law in the Louisiana Civi & Criminal Code in the years 1998-2005. It did not then and does not now, I would imagine. Texas, on the other hand, does. This was from personal experience with legal representation out of DC and San Antonio. If it has changed or was there and did not apply to my specifics, I do not know. The attorneys told me Louisiana had a law "with no teeth for a false claim."

Permalink Reply by jim weyland on December 4, 2013 at 10:07

i guess i'm not surprised. thanks.

Permalink Reply by Skip Peel - Mineral Consultant on December 4, 2013 at 10:46

Steve, in long running discussions, when the Reply button disappears it is best to go to the Reply to This box just under the discussion title at the top of the page.  My comments are applicable to all major and mid-major energy companies, not just CHK.  They all employ a large number of company attorneys and litigate a lot of cases.  That's the way the industry has evolved and is not a reflection IMO of any intent to do wrong.  Their business is complex and subject to legal disagreements.  The industry invests in top legal talent as a matter of business as usual just as they invest in supporting elected officials at all levels of government.  Although they are a formidable opponent they do get challenged on a regular basis. A good deal of litigation is between companies, not mineral owners.

Permalink Reply by Larry D Herren Jr on December 12, 2013 at 7:07

Yes I'm interested I have land in Vinton La. Please let me know. I have oil and gas that has been producing since late last year. Larry 314-918-5752.

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