SALEM, Ohio — The agreement to end a dispute over royalties paid by Chesapeake Energy to land and mineral rights owners in Pennsylvania has hit a snag and may be headed to court after all.
On Aug. 30, Chesapeake Energy agreed to settle a class action lawsuit that alleged the company underpaid gas royalties to leaseholders.
On Sept. 12, however, Atty. Douglas Clark, of Peckville, Pa., filed a motion to intervene in the case. He is representing 90 landowners who have been battling Chesapeake for a couple of years over the low royalties they were receiving.
$7.5 million settlement
According to the Aug. 30 agreement, Chesapeake Energy agreed to pay $7.5 million to settle the lawsuit filed by 14 plaintiffs from Susquehanna, Northampton, Lehigh, Lancaster and Montgomery counties in Pennsylvania, and Cortland County in New York.
The case was set to go to court and become a class action lawsuit prior to the settlement negotiated by lead attorney Michelle O’Brien of the O’Brien Law Group, of Moosic, Pa.
O’Brien had previously told Farm and Dairy the court still has to approve the case as a class lawsuit and then approve the settlement terms
But Clark, who has been working on the case for over a year, is hoping the court stops the case from moving forward and instead orders arbitration in the case.
Clark said his clients feel the amount offered in the proposed settlement is too low and that they are entitled to more.
Several thousand leaseholders allege that they were wrongly charged fees related to the process used to refine and transport natural gas extracted from the Marcellus shale.
Market enhance clause
The problem with the leases in question is a “market enhancement clause.” This clause enabled Chesapeake Energy to take deductions for processing the gas.
The clause allowed the gas company to deduct any costs incurred to the company after the gas entered a marketable state, which meant when the gas was able to enter a pipeline.
Some gas leases allow companies to deduct expenses the companies incur while moving gas from the well to the market. These costs include compressor stations and the pipelines.
The issue came to light when landowners asked for guidance because they believed they should not have had certain deductions taken out of their royalty checks.