The article below was sent to me.  I am somewhat bothered by the "10-year, 100 percent fixed-fee gathering agreement."  That seems to eliminate any competition or motivation to keep gathering costs down.  Given the concerns we already have about CHK's higher-than-average deductions for their royalty owners, this does not sound good to me.  Does anyone else have a better interpretation of what this means?

 

Midstream paying $500 mln cash

* Involves 220 miles of pipeline in Louisiana

HOUSTON, Dec 16 (Reuters) - Chesapeake Midstream Partners L.P. CHKM.N> said on Thursday it plans to buy a natural gas gathering system and related assets in the Haynesville Shale from a subsidiary of
Chesapeake Energy Corp (CHK.N: Quote, Profile, Research, Stock Buzz) for $500 million cash.

The acquisition will be financed with a draw on the partnership's revolving credit facility of about $250 million plus $250 million of cash on hand.

The partnership will acquire Chesapeake's 100 percent ownership interest in the Springridge system which consists of 220 miles of gathering pipeline in Caddo and De Soto Parishes in Louisiana .

At closing, the partnership will also enter into a 10-year, 100 percent fixed-fee gas gathering agreement with Chesapeake Energy.

After the deal, Chesapeake Midstream will have about $500 million of additional borrowing capacity on its credit facility.

The deal is expected to close before the end of this year. (Reporting by Anna Driver in Houston; Editing by Tim Dobbyn)

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I contacted Chk about the low prices. After checking, they "discovered" a mistake.  They were taking out fees (that didn't even show on the check stub) that were not in our lease.  Then, they reimbursed back only 5 mo. Upon questioning, they checked again & went back to refund the whole time we'd had a well (another 12 mo.).  Now, we have no idea if they even did the figuring correctly or not..no way to know since nothing even showed on the stub. How in the world can well owners know if they are getting the right price.  It seems there is much manipulation of figures which should be looked at by the state of LA.  I wrote them and they didn't answer. Guess they figure we should be grateful for whatever we get! We are, but want honesty in the deal too. SAM

In Texas, Section 91.504 of the Natural Resources Code requires producers to itemize deductions.  But, the mineral owner must request this in writing and it must be sent certified mail.  Otherwise you won't get squat as far as an explanation.  I requested this in 2010 because it appeared "unnamed company" was "netting out" expenses from the price of gas being sold on the market. Meaning,  if gas was selling for $4/thousand cubic feet... and the company's expenses were $1 per thousand cubic feet for transportation or whatever... the royalty owner would be paid at $3.  As i understand the law, companies can't reduce the price of gas by netting out expenses.  They would be required to pay royalty owners the $4 and show deductions/expenses (if required and allowed by lease) on your pay stub.  

After my request... the price they paid... again appeared to reflect the cost of gas at the time of production.  but after looking at the October 2010 statement... we're getting less than a dollar per thousand cubic feet than any other producers adjacent to our wells.  There are no deductions on the payment stub.  I'm not a lawyer... i only understand a tenth of oil/gas law.  It's all very disheartening especially if you're a royalty owner and a stockholder.  it would be nice to see a "friendly" investigation from state regulators in Texas and Louisiana.  But we all know the laws are written to favor the industry.  Which in an odd way is OK.  Producers risk a lot of money to get needed energy supplies.  But when landowners sign leases, it's for a lifetime and we'd like to be treated fairly.

Unfortunately some oil companies choose to abuse their power over the royalty owner, and believe it or not their annual budget accounts for royalty litigation. The Texas statutes you mention, as well as the La statutes, allow a royalty owner to file suit if they do not get an adequate response to their inquiry. You can recover interest on the underpayment, attorney's fees and court costs. Having said that, the companies who are taking advantage are betting that the royalty owner will not want to go through the stress and frustration of a lawsuit. That is especially true if the underpayment is small. It is part of the business. The legislature has done some good by enacting the royalty reporting statutes, but are not charged with enforcing the laws they create. The Railroad Commission and Department of Natural Resources are likewise not charged with enforcing the Statutes. Writing to them will fall on deaf ears. The enforcement of these statutes is left up to you and the court system. That is why the legislature did provide you the ability to recoup your costs and attorneys fees if you win. Not a perfect system by any means, and the companies know that.

Correct on all counts.  Plus they have more lawyers and more money.  Seems a good route might be through honest members on their board of directors.  thanks

 

JHH,

This "unnamed company" advertises on its web site about how you may contact their board.  Give it a go...

 

Chesapeake Energy Corporation Board of Directors
c/o Jennifer M. Grigsby, Corporate Secretary
P.O. Box 18496
Oklahoma City, OK 73154

If you can get a large group to write a joint letter (or multiple letters) to the board you might have a better chance of them paying attention. But maybe I'm just jaded with my experience with this particular company.
Sounds like a great idea..........  Henry, what do you think?
I have no lease with those guys.  It's you leaseholders who should start writing.

And better yet,

Contact or write your local representative to the state legislature.  Ask him/her to propose a transparency in reporting law.  Require any operator who takes oil or gas out of Louisiana lands to provide the gross price, and an itemized listing of each deduction, leading to the net price, on each monthly statement.  If enough people in NW Louisiana leaned on their legislators, this could happen.  How could anybody be against transparency?

 

So Linda, let's draft a letter on that, and let everyone send it to their representative.  OK?

Good idea, Henry.  I think we saw the similar, and good, results when addressing the water issues. 

 

80)

thank you, Ben  80)

 

I'd like to add to that ... a well worded letter, sent "return receipt."

Great idea.  Thanks!

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