Is it true that Chk sells NG to a company it owns AND sells it for less?  Is this legal? What can we do to contest this? They have made some kind of error on % paid to us, plus other things that seem irregular to us. How can we check this out? Thanks. S

Tags: CHK, Royalties, and

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It is interesting, I wonder how long before the tanning industry gets LEDs.. if they havn't already.
WW,
Selling gas to an affiliate is done by many companies, as Katie has pointed out. This is legal and common.

What people are questioning is the initial appearance that Chesapeake is paying less to its leaseholders than other companies. The initial data I collected did indicate that. However, two landowners have pointed out to Chesapeake that mistakes were made on their statements and Chesapeake has agreed to correct this. So now I am trying to collect more data, so that we have a large sample. I cannot say, at this time, that any operator is definitely paying less (or more or that matter). Once I get more respondents in my survey, we will be able to draw better conclusions.
henry, thank you for going the extra mile on this. i have no doubt ches. would not be playing so nicely if it were not for your blog. dont forget to charge them intrest...!
kj
kj,
Thanks for the kind words. This discussion is taking entirely too much of my time, but I'll see it through. My goal for the next few months is to increase accuracy in my reports and expand the number of respondents. I think the respondents are getting tired of me continually going back to them asking for more detailed explanations of their numbers. But, I really want to get things right and be fair to all.
Your questions are not tiring. Your information and upcoming database should be very helpful to all. Hope to get the rest of my information to you asap. thanks, jhh
Henry, I am the SAM questioning Chesp. practice of selling NG to its own entity. Jeff at Chesp. answered me that Chesp. does sell its NG to Chesp. Mineral Co-no excuses or explanations. Now, I assume I need to find out what our lease & division order says about selling price. Then, if it says the avg rate of a month or the rate at a certain day of the month (like 15th), then I suppose I need to get that rate for those months and compare what Chesp. paid us....they probably don't think many will go to that much trouble, but they don't know me when it comes to a co. being unfair..especially if you know firsthand about such stuff as the ENRON deals done. Sure makes one leary of a co. at the first ? that comes up! Does the above sound like the route I should take? Appreciate it. SAM
Sam,
I don't have a full answer to your question, but you asked what I think.... I don't think it is wrong to sell gas to your own subsidiary. Many gas companies do it. I, personally, would think that the company should try to make this transaction as transparent as they can to the mineral owner, so that he doesn't have any reason to suspect wrongdoing. I do think Chesapeake could be more transparent by putting the gross price, and the price of each deduction, on the monthly statement - that would go a long way toward building trust with the mineral owners. Otherwise, they run the risk of each mineral owner exercising his rights to call them monthly and ask for an explanation.

I think you are fully within your rights to ask Chesapeake for an explanation of how they got to the number that appears on your statement. However, before you start the conversation, read your lease and know what it says. Katie Mc is absolutely correct when she says each lease is different, and the answer will be dependent on the specifics of your lease.

Finally, politeness is the way to go. The people on the phone in Oklahoma are doing their job the best they can. Two of our mineral owners have already gotten their statement corrected, and a promise of a refund, when working with CHK. It may take a few back-and-forths, but I think Chk will eventually get you the explanation you deserve.
Henry,

The question still remains, "why is Chesapeake paying less than all the other companies?" If most of the companies are selling to affiliates, like you say, then wouldn't the prices be about the same??????

I'm still waiting on a response from Chesapeake in reference to my Division Order. It's been five (5) days, and no one except Katie has bothered to contact me. All I need is an explanation on how they calculated my ownership interest. How simple is that!!!!!

Linda
Linda,
I think the jury is still out on whether CHK is paying less or not. Based on the responses I have to date, I don't think we can fairly conclude that CHK is paying less. The data were initially skewed by the fact that two of the mineral owners were not being paid correctly by CHK. But, those two have contacted CHK, and the error was admitted, and CHK has pledged to fix it, We are waiting to see if the mineral owners will be satisfied with the fix.

The initial data were also confusing, because of the opaque way in which Chesapeake reports on the monthly statement. While most other companies report the gross price and all deductions, CHK reports only the net price. This makes it impossible for a mineral owner to understand what is going on, without calling into Oklahoma to find out. (And, as you have seen, you never get an answer on the first phone call.)

For those mineral owners without cost-free royalties, it does appear that CHK is paying a bit less than the others. But, I have very small sample sizes, and most of my CHK data come from a single region (northwest DeSoto/southwest Caddo). So I am unwilling to draw a conclusion yet.

As always, I NEED MORE DATA!

henry
Hey Henry,

THanks for the clarification........ hopefuly we'll have enough data before too long so a valid conclusion can be made. I'll forward my info to you after I receive my first royalty payment, but first I gotta get this Division Order problem cleared up. I'm hoping CHK will contact me tomorrow and let me know something so I can get the order, or corrected order, back to them before the 20th.. ..... I'll keep you posted.

Linda

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