Chesapeake Energy agrees to pay $7.5 million to settle royalty lawsuit

    The biggest natural gas drilling company in Pennsylvania has agreed to pay $7.5 million to settle a class action lawsuit alleging the company underpaid gas royalties to landowners.

    Chesapeake Energy has been sued throughout the country over allegations that it cheats leaseholders out of royalties.

    This lawsuit alleges Chesapeake improperly withheld “post-production costs” which are the expenses involved in transporting and processing the gas from the well to the market.

    While it is legal for gas companies to take these deductions, some leases explicitly prohibit it. The suit claims Chesapeake did it anyway.

    Attorney Michelle O’Brien said the settlement applies to anyone in Pennsylvania with a Chesapeake lease that specifically prohibits the deductions, often referred to as a “market enhancement clause.”

    “We think there are multiple thousands of people, of landowners, that this applies to. I don’t have the exact number but it’s in the multiple thousands,” said O’Brien.

    Chesapeake spokesman Jim Gipson called the settlement fair and reasonable in an emailed statement.

    “Chesapeake is pleased,” he wrote. “We are hopeful the Court will approve the resolution of this dispute.”

    The court still has to approve the settlement terms. After that happens, members of the effected class will be notified.

    O’Brien added that money will not be split evenly among them, but will instead depend on the amount of deductions each leaseholder has incurred.

    “If there’s 5,000 plaintiffs the amount of the settlement will not be split evenly by 5,000 people,” she explained, “So for example, if one person had $100 in deductions out of their check, and another person had $1,000 taken out, there would be different amounts returned for both plaintiffs.”

    Jackie Kingsley, a township supervisor in Bradford County and a Chesapeake leaseholder, said she believes this lawsuit may impact one of her leases with the company.

    “I felt a little bit vindicated because we’ve been saying all along that this wasn’t right. So if they’re telling us they’ve taken deductions in accordance with the law, then why do we have this settlement,” asked Kingsley.

     This story was originally published on StateImpact Pennsylvania, a joint energy and environmental reporting project by WITF and WHYY

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