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Does Chesapeake Deduct PA Act 13 Impact Fee from Royalties?

Does Chesapeake Energy deduct PA’s Act 13 “impact fee” as an expense before paying royalties? The answer depends on whom you ask. Chesapeake says they do not, but at least one of their contracts, reviewed by the National Association of Royalty Owners (NARO), includes the Act 13 fee in the list of deductions.

So, do they or don’t they?…
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Hess Will Challenge OH Court Decision to End Lease

A few weeks ago MDN told you about the court case Hess lost where they tried to tie up the leases for Ohio landowners beyond the initial 5-year term (see Hess Loses OH Court Case, May Owe Big Bucks to 300 Landowners). What it amounts to is that Hess doesn’t want to pay them more money. The landowners who sued and won–Stephen and Melissa Griffiths from Jefferson County, OH–received an initial $6,500 in bonus payments in 2007 for their 228 acres. If they were signing a lease today they would get something like $1.5 million! Hess didn’t drill on the property during the 5-year term called for in the lease, but instead claim some cockamamie extension in the lease terms allows them extra time before they drill. Sorry Charlie, the judge said no.

Hess is miffed and says they will “vigorously challenge” the court decision, tying up the Griffiths’ lease for perhaps another year while this works its way through yet another court…
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2nd Landman Pleads Guilty to Single Count in $2.4M Fraud Scheme

A month ago MDN told you that one of two landmen accused of stealing mineral rights from unsuspecting landowners by forging signatures and using fake companies had plead guilty (see PA Landman Pleads Guilty to Defrauding Landowners, Off to Jail). His name is William Ray and he’ll not only do three years in the big house, he’ll also pay back over a half million dollars of what he stole.

At the time, Ray’s partner in crime (and the mastermind behind the scheme), Derek Candelore, plead not guilty. Yesterday Candelore plead guilty to one charge of mail fraud…
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PA’s Top 10 Marcellus Shale Wells – Full Details

Top 10Who doesn’t like a Top 10? We have one for you: What are the Top 10 producing Marcellus Shale wells in Pennsylvania? Would it surprise you to learn that 8 of the top 10 wells are found in a single PA county, drilled by the same driller?

Here’s the Top 10 PA Marcellus Well List, complete with the name of well, county, driller, estimated earnings per day and estimated royalties paid per day:
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Wirt County Landowner Deal Falls Through, Still Searching

In August, MDN reported that the largest Marcellus landowner group we’re aware of, the Wirt County, WV Landowner group with 241,000 acres, was close to signing a deal (see Wirt County Landowner Group Close to Deal for Huge 241K Acres).

According to the group’s chairman James Lydon, that original deal has fallen through and the group is now back in the hunt for a deal, talking with other drillers…
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Harrison County, OH Leases 357 Acres to CBM Ohio for $5K/19%

CBM Ohio, a company that until now has concentrated on producing coalbed methane (hence the name), is venturing into producing natural gas from the Utica Shale.

CBM’s first Utica foray comes in leasing 357 acres of county-owned land in Harrison County, OH. On Wednesday, Harrison County officials signed a lease with CBM for $5,000 per acre signing bonus and 19% royalties…
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PA Republicans Introduce 4 Royalty Bills, Mea Culpa?

A new PA law was supposed to give leased landowners whose property has had drilling more protections with respect to royalties, but instead ended up harming some landowners who are not leased by allowing forced pooling of their land–weakening their bargaining position (see PA Gov Corbett Signs Back-Door Forced Pooling Bill into Law). PA landowners in general and the National Association of Royalty Owners (NARO), PA chapter in particular were not pleased with the new law. Perhaps in an attempt to get back into the good graces of PA landowners, several Republican state lawmakers whose districts are in the Marcellus Shale have introduced a plethora of new bills to protect royalty interests of landowners.

A group of four House Republicans, led by Rep. Garth Everett (R-Lycoming County), recently introduced House Bill 1684, which seeks to clarify state law regarding the minimum royalty payment for landowners so that the deduction of post-production costs from unconventional wells may not result in royalty payments less than the guaranteed minimum. On the Senate side, Sen. Gene Yaw, whose district covers many of the northeastern PA drilling counties, introduced a series of three companion bills to HB 1684. It seems the Republicans can’t do enough now to help out leased landowners…
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Aubrey Leases More Land for Drilling — in the Northern Utica!

The puzzle pieces continue to fall into place with respect to the deals being done by former Chesapeake Energy CEO Aubrey McClendon in the Utica Shale. Last week MDN told you about a joint venture between McClendon’s new company, American Energy, and Red Hill Development, to lease land for drilling in southeastern Ohio–counties like Guernsey and Harrison (see McClendon’s Utica Company Does JV with OH Driller, Drilling Soon). We now know about a second joint venture–this one with Great River Energy–a new production company formed through a partnership between McClendon’s American Energy and Texas firm Orange Energy Consultants.

The surprise about this new jv? They’re leasing land in Columbiana and Carroll counties, north of what is thought to be the “sweet spot” in the Utica wet gas area. Looks like Aubrey just can’t stay away from the northern Utica!…
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Rice Pays Belmont County Higher Signing Bonus than Landowners

Rice Drilling is betting big on Belmont County, OH. County commissioners recently signed a sweet deal with Rice Drilling for 406 acres of county-owned land. The lease terms were $7,500 per acre signing bonus and a 20% royalty. That delivers just over $3 million to the county coffers, plus a lot more when the gas begins to flow.

The county deal is, however, sweeter than other recent contracts signed by Rice in the area–contracts between Rice and more than 1,000 landowners in Belmont County. Those leases resulted in payments from Rice for more than $236 million! But area landowners got “just” $5,900 per acre from Rice for a signing bonus…
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Hess Loses OH Court Case, May Owe Big Bucks to 300 Landowners

Hess has just lost a court case in Ohio that may end up costing the company dearly. Hess had purchased leases in eastern Ohio from other companies. The original leases date to 2006-2008 and in many cases the landowners were paid as little as $10 per acre for a signing bonus–absolutely peanuts compared to today’s rates for $5K or more per acre. A Jefferson County landowner sued Hess to get out of his lease agreement because the company had not drilled on his property. Hess argued provisions in the lease let them extend the lease by paying a nominal extra fee.

Hess lost, and now will have to pay that landowner (and by extension around 300 other landowners) big re-signing bonuses or risk losing the land…
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WV Landowner Tries to Stop Shale Drilling with New Water Wells

Here’s a novel approach by a landowner to try and stop drilling on land already leased. A landowner in Doddridge County, WV didn’t like how he was being treated by driller EQT, so he drilled several water wells close to where EQT planned to drill Marcellus Shale gas wells on his property. In WV, you can’t drill within 250 feet of a water well–so the water wells effectively shut down drilling on his property.

Except… EQT is now suing the landowner for bad faith and intentionally trying to obstruct a signed contract. Based on the facts in the case, we expect EQT will prevail. Drilling the water wells was “cheating” to prevent drilling and ultimately to get out of the lease. Creative, perhaps–but misguided…
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Lawyers Say Don’t Ignore Chesapeake’s PA Lawsuit Settlement Letter

don't ignore meChesapeake Energy recently settled a lawsuit with Pennsylvania landowners in which they agree to pay (a pitifully small) $7.5 million to landowners after shorting them on royalty payments (see Chesapeake Settles PA Royalty Lawsuit for Pittance: $7.5M). The National Association of Royalty Owners Pennsylvania chapter is telling landowners to pay “very close attention” to the settlement letter when it comes.

The settlement letter may have much broader implications than just getting a check for a few bucks from Chesapeake. It may set the rules for how your future royalties will be calculated…
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PA Game Comm. Head Not Afraid of Gas Leasing Ethics Investigation

A month ago MDN highlighted the story of potential double-dipping by the director for the Pennsylvania Game Commission, William A. Capouillez, who moonlights as a consultant for landowners leasing their land for oil and gas development–sometimes signing deals with the same companies who do business with his agency (see PA Director of Game Commission Double-Dipping with Gas Leases?).

The pressure on Capouillez continues. An article in today’s Philadelphia Inquirer announces that State Rep. Daryl D. Metcalfe (Republican from Butler, PA), who is the chairman of the House Committee on State Government, has asked the State Ethics Commission to investigate his activities. Capouillez’s response? Bring it on. He says he hasn’t taken on new clients for his moonlighting job in three years and has done nothing wrong…
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PA Landman Pleads Guilty to Defrauding Landowners, Off to Jail

A few weeks ago MDN told you about the arrest and charges against a Butler, PA landman–Derek Candelore–who is accused of an elaborate scam in stealing away mineral rights from unsuspecting landowners by forging signatures and using fake companies (see When Landmen Go Bad: Butler, PA Landman Arrested for Fraud). Candelore plead not guilty, but his partner, William Ray, has just pleaded guilty and when convicted will spend something like three years in the clink for his crime.

Mr. Ray will not only do the time, he’ll also have to give back over half a million dollars he received as part of the scam and continue to pay back what he stole from his future earnings after he’s done making license plates in the pen for ten cents an hour…
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Done Deal: Chesapeake Drops Leases on 13K Acres in NY

Last week MDN told you that Chesapeake was set to release 12,000 acres of leases in the Southern Tier of New York, abandoning a legal fight to extend those leases (some of which they paid $2-3 per acre for) by using a legal concept called force majeure (see Chesapeake to Release 12K Acres of NY Leases Next Week). Major media outlets from AP to Reuters are reporting Chesapeake, as of Monday, has officially dropped those leases.

One slight update: it was actually 13,000 acres, not 12,000 acres as originally reported…
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Is Chesapeake Robbing Graves in OH Village…or Getting Robbed?

grave robberWe can see the headlines now: Chesapeake Energy is a (Gas) Grave Robber! Wait until the anti-drillers get hold of this story… Chesapeake has struck a deal with the Village of Salineville (Columbiana County), OH to lease and drill under 17 acres at the Woodland Cemetery. The deal stipulates no surface disturbance of any kind (a very good idea).

But who is robbing whom? Listen to the deal the village got: Chesapeake is paying Salineville $44,145 annually for five years, plus 15% royalties. The annual payments add up to $220,725, or if you think of it as a signing bonus stretched over 5 years, it’s $12,984 per acre. Wow!! That’s perhaps the highest per acre signing bonus we’ve heard of in the entire Marcellus or Utica Shale. Kudos to the Salineville board members who suckered negotiated the deal with Chesapeake…
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