Chesapeake Battles with Landowners Continue

An Italian proverb states "A bad agreement is better than a good lawsuit."  I wonder if Chesapeake Energy is going to think the same thing when some of the courtroom battles they are involved in finally come to an end.

Two separate articles outline two separate battles for Chesapeake, one in New York and one in Pennsylvania.

The first is covered by Marcellus Drilling News.  The gist of the case (quoting from MDN's article):

Nearly a year ago, a group of landowners in Broome and Tioga counties (New York State) sued Chesapeake and partner Statoilhydro over Chesapeake’s claim of “force majeure” in lease contracts. The contracts were originally signed between 1999-2005 for $3 per acre with several different companies. Those companies sold the leases to Chesapeake, and Chesapeake took on Norwegian company Statoilhydro as an investing partner to help develop the land. Last year Chesapeake sent the Broome and Tioga landowners a notice that under the terms of the contracts which contain a clause called force majeure, they (Chesapeake) were unilaterally extending the contracts beyond the original term.
Force majeure is a legal term that means “due to things beyond our control”—like floods, earthquakes, and in this case, the fickle whims of politicians. Chesapeake claims the ongoing moratorium on horizontal hydraulic fracturing in the state has prevented them from drilling (see this MDN story for the full background of this case).
The landowners and their attorneys say, “Wait a minute!” Horizontal hydraulic fracturing wasn’t being used in shale formations when the leases were signed. The leases were signed with the expectation that conventional vertical drilling would happen in other rock strata, not unconventional horizontal drilling in shale. Chesapeake and Statoilhydro could have drilled any time they wanted during the lease period (using conventional technology) and opted not to. So their inaction is their own fault.
Plus, it appears that Chesapeake is trying to twist the law to their advantage so they don’t have to renegotiate and pay current market rates to keep the land under lease. There’s a world of difference between $3 per acre and $5,000 per acre or more.
A new judicial ruling has just been issued which will have a major impact on this case.

The second matter is covered by Kristy Foster at Farm and Dairy, and is taking place in Pennsylvania.

The basics of this second case (quoting from the article):
The landowners signed leases between 2002 and 2005 with O&G Investment Holdings LLC, in Wooster, Ohio.
The lawsuit names Jason F. Henthorne, of Key West, Fla., and Jay G. Henthorne, Marathon, Fla., who were officers of O&G.
The suit states that none of the leases signed by the landowners were ever recorded at the county recorder’s office. Instead, a memorandum of oil and gas leases was recorded five months after the initial signing.
The leases were eventually sold by O&G to Ergon Exploration Inc., and Petro Evaluation Services in 2007 and 2010, respectively.
Chesapeake. The leases were then sold to Chesapeake Appalachia, LLC, in May 2010.
The Beaver County landowners stated they have never been paid any delay rentals since signing the lease. They also claim they have not received any production royalties or shut-in royalties.
In addition, none of the companies that acquired the leases have filed to reasonably develop the mineral resources of all of the plaintiffs, according to the suit.


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