Penn. State Senator Asks For Investigation Into Chesapeake Energy Royalty Payments

Feb 14, 2014

Pennsylvania State Sen. Gene Yaw (R- Bradford) is asking for an investigation into Chesapeake Energy.
Credit Provided / Senator Gene Yaw

The chairman of the state Senate Environmental Resources and Energy Committee, Gene Yaw (R- Bradford) is asking state Attorney General Kathleen Kane to investigate allegations of fraud against Pennsylvania’s biggest natural gas driller, Chesapeake Energy.

Yaw sent a letter to Kane’s office today asking for an official inquiry into Chesapeake’s business practices. The Oklahoma City-based company has been at the center of widespread allegations it underpays royalties, by charging landowners for the costs of processing and transporting natural gas.

“I’ve gotten all kind of complaints and people saying that they’re being cheated, and that it’s fraud,” Yaw tells StateImpact Pennsylvania. “I can’t solve some of those problems. I don’t have the tools to investigate those things. ”

State law requires companies pay a minimum 12.5 percent royalty to landowners who lease their property for drilling. The royalty deductions– known as gathering fees, or post-production costs– are legal in many cases. However, Chesapeake has been accused of skimming more than other companies, self-dealing, misreporting gas production data, and violating lease terms that explicitly prohibit the deductions.

Many of Chesapeake’s Pennsylvania leases are in Bradford County. Some landowners there have been outspoken, saying they routinely get far less than the required 12.5 percent and feel cheated by the natural gas company.

Bradford County Commissioner Doug McLinko (R) welcomed Yaw’s efforts.

“We appreciate any help that we can get on what we consider to be borderline criminal behavior,” he says.

Chesapeake Energy declined to comment on the matter. The company has faced similar allegations and lawsuits all over the country– including in Arkansas, Louisiana, Ohio, and Oklahoma. Last fall, Chesapeake was sued by the city of Fort Worth, Texas over claims of underpaid royalties.

In August, Chesapeake agreed to settle a class action lawsuit in Pennsylvania over the issue, but the terms of that agreement still await approval from a federal judge. Several public officials have questioned whether the settlement terms represent a good deal for landowners.

Kane’s office did not immediately respond to a request to comment.


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