We have mineral rights on land in Caddo Parish. Chesapeake has had a gas well there since 2008.  Since Feb.2019 I have noticed that they are again taking transportation and other charges out of the already low check each month.  Our contract states that we are "free of all charges" and names the charges, which includes transportation, etc; but of course, we do pay severance tax.  I contacted Chesapeake in March and they said they would turn it over to their legal dept. So far, no word & I have tried again and again to get a word from them, but they don't respond.  This did happen in 2013 and they had to go back and refund us the charges, but I hear there is a change in the law that may negate the wording of existing contracts.  I don't see how that can be, but hey, anything can happen. We are at a standstill as to what to do now. A lawsuit would be long & drawn out and costly.  Anyone else have this issue or solution?

They are taking at least 20-25% out for these charges! We would sell some or all mineral rights, but who will buy with these charges tagged on?

Sara

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As far as I know, there is no change in the law.  The usual issue with the lease term regarding the lessee's ability to deduct post production costs comes down to specific language.  There is case law regarding the language used and how it relates to the lessee's right to deduct from royalty payments.  That is an area for O&G attorneys, not landmen.  I will say that if an O&G attorney drafted the language in the lease, they were aware of that case law and provided language that would hold up in a court of law.  If the lessor requested a no cost clause from the land company representing the client, chances are it was one that did not have the specific language established in case law.  Personally I think that violates legal standards of arms' length transactions but I am just a landman, not an O&G lawyer.

Oh my gosh!  Say it ain't so!  Cheating?  I'm shocked!

OK.  Enough of the exclamation points.  I guess I have to dust off my old postings, and remind everyone that Chesapeake should NEVER be trusted.  This scheme is their bread and butter.  They cannot make money off of $2 gas.  So they have to rob their mineral owners by overcharging on things like marketing and transportation.  This has been going on since Day 1 of the Haynesville Shale.

My opinion?  You are hosed.  Unless you own a gazillion acres so it is economical to hire an attorney, you have no chance.  You can write them all the letters you want, but they will just toss them.  This is their standard operating procedure.

Well, I have made a number of disparaging remarks about CHK over the years, so now it's time for me to be fair and balanced.  My family owns land in a CHK production unit.  I'll be the first to admit that it is a complicated title, with part being held by an old producing Hosston gas well and subject to a 1/8 royalty and the rest under a new lease with 1/4th royalty and a no-deductions provision.  We all received letters several years ago that we had been overpaid (tens of thousands of $$ each) and we were placed in suspense.  I fired off a certified letter demanding an accounting, and ended up with an in-house CHK attorney who was rude and curt, and, basically told me to go pound sand or sue them.  Now that I'm partially retired, I  had time and picked it up again.  This time I had a different in-house attorney, who worked with me over the course of several months until we finally got our ownership resolved, royalty payments resolved, and some of us are back in pay status (but the payments are piddling with the current production and price).

In the course of our getting to the bottom of things, it turns out that at the start of production, CHK attributed 10 acres of minerals to the current owner, although our mineral reservation 30 years ago was still in tact.  I'll admit, the production that held that 10 acres was a title attorney nightmare and a title bust just waiting to happen.  However, even with that corrected, it turns out that CHK had overpaid all of use from day one.  Frankly, the CHK land records staff made a number of mistakes - some sloppy - from day one.

My point is that the CHK attorney and division order annalist  worked with me over the course of several months until every loose end was tied down and things were resolved.  

Just felt like I should give credit where credit was due.  This doesn't mean that other allegations about them aren't true, but maybe I was just lucky.

Steve, you might remind the members that you are an attorney and thus experienced in dealing with legal/title issues and other attorneys.  Good to hear that your ownership interest has been corrected.

You go, Henry!  LOL!

Thanks a bunch Henry! I really knew about Cheating Chesp! We had the problem way back & when challenged ( no atty) they reimbursed us in 2010 & quit taking those charges out. Then in April 2018 kazaam the charges began to appear again! Now, you’re right they ignore me! Shouldn’t there be a class action law suit or something to stop this if it’s widespread?

Sam,

There was a class action suit several years ago.  It went to settlement.  Alas, the settlement agreement did not require CHK to stop the practice going forward.  They only had to pay what was owed going back.  Many people on this site participated.

I tried to work with the state many years ago on this, to see if they would get interested in going after CHK on what, I believe, is a scam of a large number of Louisiana residents.  No interest.

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