Unleased mineral owners with Chesapeake production and no payments

I'm looking for Haynesville Shale unleased mineral owners, with Chesapeake production on their section, who are not being paid, and are not receiving well reports.

I recently discovered I have a tract where Chesapeake has not paid me, nor forwarded well or production reports.  The wells in question are way past payout.  Title to the land is clear and it is clearly unleased.

I've been told that Chesapeake will frequently just stonewall the small unleased owner who has well production, even where money is clearly owed, since the cost of litigation is frequently greater than the potential recovery.

My contention would be that CHK alone knows whether 100% of the lands in a given section are leased or unleased, and whether the owners have been paid or not.  If all of the tracts that are small and unleased, have unknown ownership/title questions, etc. are not being paid and the funds were just kept by Chesapeake, the amount could be considerable.  Based on my experiences, it appears that the accounting practices are conducted without requiring that all of the funds be properly disbursed to 100% of the owners.

Please note that my reference to unleased mineral owners is only towards owners with Chesapeake wells drilled and producing on their unit.  If you fit this category, please reply as quickly as possible.  The Chesapeake bankruptcy is moving swiftly towards confirmation.  Contact me at steve at ptprop dot com or reply to this submission.

Second question, on another tract (different circumstances) Chesapeake paid, but withheld about $10,000 for IRS withholding funds, but I have never received credit from the IRS for this withholding.  Anyone else had this experience?

Third question, has anyone had experience with Chesapeake actually remitting funds to the state as unclaimed property?

Considering the tremendous diversity in land title circumstances, I would expect a great amount of filings by Chesapeake to the State of Louisiana, as the law requires.  Specifically on my tracts, where funds are owed or were withheld and not apparently disbursed, the funds have not been remitted to the prior owner, to me nor to the state.  Has anyone else experienced this?

Thanks, Steve

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Unleased Mineral Interests (UMI) must send a demand letter to the operator of a unit in which they have a mineral interest before the operator is required to provide quarterly reports.  The demand letter must meet certain requirements as outlined in the Mineral Code. There is a class action suit against Chesapeake for unauthorized post production deductions on UMI interests that are not allowed by the Mineral Code.  Right now that class action is being defended in the bankruptcy proceedings.  I expect there will be a resolution in the coming weeks.  I also expect that some portion of the suit will go forward after the bankruptcy is discharged.  You can go ahead and send a demand letter to receive quarterly reports but other than that you will have to wait and see how the courts rule.  If the Chesapeake UMI class is certified, you can join. 

Skip,

Thanks for the reply.  Several years ago, I sent a certified letter with a request for well reports in accordance with the Louisiana Mineral Code, and followed up with phone calls.

No response was ever received.

According to Pacer, the request for class certification has been denied in the Chesapeake bankruptcy, although I suspect it was on a technical issue with the Johnson-Hudson filing (purportedly class certification was delinquent by five months past federal cutoff date), rather than the broader merits.  The details are in transcript form which I have not yet received.

The issue of post-productions costs for UMI is certainly relevant after the Johnson decision, but my claims are additional to those.  In the Johnson-Hudson filing, the UMI was compensated for the production but the claim is that the compensation was inadequate due to the Judge Hicks ruling on the matter of non-allowable deductions. 

My claim is no compensation of any type for the force-pooled/expropriated minerals.  My question is whether this has happened to other people who lack sufficient capability or incentive to challenge it in court, or is this an anomaly?  I can envision a circumstance in which a heavily indebted company chooses to keep any payments that it can conceivably delay or avoid, regardless of the legal defend-ability of their actions.  The difficult part is that if this occurred, many people (such as myself) who did not receive any notices, would not be aware of the issue.  In this case we are asking the fox to notify the farmer that some of his hens might be missing.  In my case, it has recently become quite clear.  The question is, as I said before, has this happened to a number of people?  I have two separate tracts in two different parishes where notice of drilling, annual reports, production reports, etc. were not provided.  The odds of that occurring at random seem quite low.

Thanks for your reply,

Steve

Steve, the class certification is not a consideration in the bankruptcy litigation.  What the judge will have to decide is how to classify the production payments owed to UMIs.  If it is classed a debt, CHK can discharge it.  The deductions are not a debt and if the court agrees, CHK will not be able to discharge what is owed.  Either way the class action resumes in Judge Hicks' court with the only difference being what can and cannot be recovered in class compensation.  To be clear none of the litigants in Johnson-Hudson have received any compensation.  As I understand it they have been credited for their proportional production toward well payout which CHK claims has not occurred.  The question of class certification delinquency is not settled and will continue to be litigated. I had lunch with one of the class attorneys yesterday.  All this may be more clear when you get the transcript.

Steve, I performed the research for the class action.  Although as you say only the fox knows the number of chickens, I can say that the number of chickens fitting the general description of a UMI is in the thousands.  You are far from alone.

Unleased landowners looking for salvation in the La. Mineral Code, Title 31 should  instead be looking in the Conservation Code, specifically at Article 10 of Title 30. The Mineral Code concerns leased property.

Insofar as unleased production revenue is debt or property, that's gonna be a real doozie. 

The operator owns his share of well production costs. The rest belongs to the unleased landowner. So the operator has got your money, but by statute, it's not his. He's just in possession of it. The unleased landowner must jump through some hoops, properly timed, to get his money.

What I said, it's going to be a doozie. 

see:  https://jelr.law.lsu.edu/2013/02/21/remedies-of-unleased-mineral-ow...

         google:  Taylor v. David New

Louisiana Revised Statute 30:10(A)(3).  Post-production costs cannot be recovered by an operator from an unleased mineral owner's share of production proceeds.  Allen Johnson Et Al v Chesapeake Louisiana LP, judgment in favor of Plaintiffs' Cross-Motion for Partial Summary Judgment,United States District Court, Western District of Louisiana, Shreveport Division.

The issue of post production well costs has already been litigated to satisfaction in XXX OIL & GAS v. HILCORP, Louisiana Third Circuit Court of Appeal,  206 So.3d 885 (2016)

Which of the parties was an unleased mineral owner?

It's hard to tell in this case who was unleased and who was leased. 

To add to the confusion, read this:

https://law.justia.com/cases/louisiana/third-circuit-court-of-appea...

However, as I recall this thread was started about the deduction of post-production well costs, the Louisiana appeals court was definitive in it's opinion on the collection of pre production and post production well costs authorized by LRS 30:10. See the last sentence in paragraph nineteen of my previous link.

My point is that neither partiy appears to be an unleased mineral rights owner.  Either could be a lessee/working interest or operator. 

Lessors authorize lessees to make post production deductions in their lease language.

UMI are not burdened by a lease and the ability to deduct post production costs is limited by statute.  The Johnson vs Chesapeake case, which ruled for Johnson,  found that Chesapeake was deducting post production costs the same as the lessors under their wells.  Those deduction go beyond what the statute allows.

One of the parties made a specious argument it was not subject to the applicable statutes since they obtained leases from a third party, were not leased to the operator and so were "unleased" and thereby entitled to required reporting of well data as per statute.

Don't put any money on that hedge.

Bob, the site architecture limits the number of replies.  When the reply button disappears, go back to the dialogue box at the top of the page and post there.  That will reset the discussion thread with reply buttons until we reach the limit again.

I have a small interest in section 24.   I am UMO with this interest.  I asked Chesapeake by email to send me the full accounting of the well build, equipping, and finishing costs,  and  separate  production records for all 4 producing well per 30:10.  I made the request 3 months ago.  They replied one month later that they do not send these reports to Royalty Owners.  I replied that I was not a royalty owner, I am UMO.  They replied back via email that they would get back with their division order team. I’m still waiting two months later.

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