TUNKHANNOCK, Pa. — Pennsylvania Attorney General Josh Shapiro has announced details of a settlement agreement with Chesapeake Energy, which filed for bankruptcy in June 2020.
Shapiro made the announcement at a news conference at the Wyoming County Courthouse in Tunkhannock.
The settlement provides for better payment of royalties for Pennsylvania landowners with Chesapeake leases, including $5.3 million in restitution.
The attorney general initially filed a complaint against Chesapeake Energy, the country's second-largest national gas producer, in December 2015. The complaint alleged Chesapeake engaged in unfair and deceptive business practices in securing natural gas leases and in its improper payment of royalties to Pennsylvania landowners.
Mark Dietz from Bradford County is one of the thousands of Pennsylvania landowners who was promised big bucks from Chesapeake Energy after signing a lease with the company allowing it to drill natural gas on his land in Wilmot Township.
Now that the attorney general's office has reached a settlement with Chesapeake, the company will cut Dietz a check, but it won't make up for what he's owed, not even close.
"I think I didn't expect a lot more, just because after 10 years, I know Chesapeake now and I know who they are, and through their bankruptcies just recently, a lot of little people have gotten hurt that aren't going to get billions of dollars that they're owed."
For years, Chesapeake charged landowners for extra costs that were never included in their leases, allowing the company to skimp on royalty checks.
The Pennsylvania attorney general's office slapped the company with a lawsuit in 2015.
In June of 2020, Chesapeake filed for bankruptcy, which Attorney General Josh Shapiro says essentially stopped the case in its tracks.
"Their conduct, from the first leases they signed to their legal maneuvers over the last five years, exposed the disregard that Chesapeake has for folks here in northeastern Pennsylvania and throughout the northern tier," Shapiro said. "They didn't respect Pennsylvania. They didn't respect Pennsylvanians. And as a result, they didn't just go broke, they broke their promises to hard-working Pennsylvania landowners."
The settlement includes one-time payments to landowners totaling $5.3 million. Landowners will receive a check for either$ 700 or about $360, depending on the type of lease they had with the company. The payments will be automatically sent to landowners and are expected within 6-8 months after the bankruptcy court approves the settlement.
The attorney general acknowledged this was not the "full victory that landowners deserve" but says going forward, people will get the money they're entitled to.
"The bottom line is this settlement will end the abuse from Chesapeake and allow landowners to take a new lease with no deductions," Shapiro said.
Under the settlement, Chesapeake Energy must:
- Provide an opportunity to Pennsylvania landowners with Chesapeake leases to obtain better payment of royalties going forward;
- Stop offering leases that contain "market enhancement" clauses or "ready for sale or use" clauses to Pennsylvania landowners;
- Hire an ombudsman to investigate individual claims, selected by AG Shapiro and Chesapeake, to review and respond to landowner complaints;
- Allow the attorney general's office access to Chesapeake's books and records to ensure compliance with the settlement agreement;
- Provide clear, transparent pricing information on their website, as well as an annual report to the Pennsylvania OAG detailing royalty payments; and
- Pay landowners $5.3 million in restitution and $350,000 to the OAG towards its costs and fees.
The AG's office set up a FAQ page on its website with more details.
In a statement, a spokesperson for Chesapeake Energy said:
“Chesapeake greatly values its relationships with Pennsylvania royalty owners and is pleased to have reached a global resolution with them and the Attorney General that addresses royalty owners’ concerns. The Company looks forward to working collaboratively with Pennsylvania royalty owners going forward. The global agreement is subject to Bankruptcy Court approval.”
WATCH: Full video of the announcement from the attorney general's office.