PA Landowner Wins Case Against Chesapeake re Royalty Deductions

Paul Sidorek, an accountant representing some 60 northeastern Pennsylvania landowners who receive royalty income from drilling, is also a landowner himself. In 2009 Sidorek leased 145 acres, a lease that was eventually sold to Chesapeake Energy. Because of the troubles encountered by others, Sidorek wrote into his lease a 20% royalty and made sure the lease explicitly stated that no expenses could be deducted from the sale of the gas produced on his property. That is, NO post-production expenses could be deducted. And yet, Chesapeake disregarded the lease and deducted as much as 30 percent from his royalties, attributing it to “gathering” and “third party” expenses, an amount that adds up to some $40,000 a year (see Chesapeake Short-Changes PA Landowner on Royalty Checks). Sidorek fought Chesapeake in court, and ended up in arbitration. The arbitrator has just ruled–in Sidorek’s favor. The good news is that a PA landowner has gotten some justice against Chesapeake’s sleazy practice. The bad news is that it’s not a precedent and can’t be used in other court cases…

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