PA State attorney general sues Chesapeake Energy over shale gas royalties

HARRISBURG — The Pennsylvania Attorney General’s office is suing Chesapeake Energy Corp. and three of its subsidiaries for allegedly underpaying landowners for royalties from the company’s natural gas operations in the state.

The lawsuit, which was filed in the Bradford County Court of Common Pleas, accuses Oklahoma City-based Chesapeake of deceiving landowners as it sought to secure a broad leasehold in the gas-rich Marcellus Shale, especially in northeastern Pennsylvania.

When wells on those properties began producing gas, the company made deductions from royalties that the landowners said violated the terms of their leases.

The case also names Tulsa-based Williams Partners, LP, which owns and operates natural gas pipelines and other infrastructure, as a defendant.

Attorney General Kathleen Kane said the company’s conduct “amounts to a ‘bait-and-switch.’” Her office said the lawsuit seeks restitution for thousands of leaseholders, along with civil penalties of $1,000 for each violation of the Unfair Trade Practices and Consumer Protection Law and penalties of $3,000 for each violation involving a person 60 years old or older.

The Attorney General’s office is also filing a friend of the court brief in a class-action court case related to Chesapeake’s royalty deductions in the U.S. District Court for the Middle District of Pennsylvania, known as the Demchak class action, urging the court to reject the proposed settlement in its current form.

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At some point,  litigation costs will exceed the savings from corrupt business practices.  



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