Bradford County, PA May Join Royalty Lawsuit Against Chesapeake
In 2013, a group of Bradford County, PA landowners joined a lawsuit against Chesapeake Energy over Chessy’s apparent cheating them out of royalties using a ploy to pay high fees for pipelines in return for investments from that pipeline company later on (see Bradford County, PA Landowners Sue Chesapeake over Royalties). Some Bradford landowners were getting royalty checks from Chessy for a few dollars–literally. At issue is a state law that stipulates drillers must pay a minimum of 1/8 of revenue from gas and oil in royalties to the landowner. The controversy comes in that Chesapeake claims their contracts allow them to deduct reasonable expenses, like getting the gas to market, from the total. And with low prices–oh well–those royalty checks go far below 1/8. So what is at issue is how you define 1/8 for the purposes of paying royalties. Is it 1/8 of the gross? Or 1/8 of the net? And what would be allowed to be deducted for the net number? MDN previously told you about PA House Bill (HB) 1684 meant to clear up the confusion. HB 1684 went no where in the legislature last year (see Does PA Royalty Bill 1684 Still Have a Chance This Year?). Looks like the bill will come back around again this year–but before it does, the supervisors of Bradford County, which has land under lease with Chesapeake, are seriously considering joining the lawsuit against Chesapeake. They’re tired of waiting for 1684 to become law and tired of being shorted on their royalties…
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Attention Martian parents from the Mars School District in Middlesex Township (Butler County), PA: In Allegheny County (bordering Butler County on the south) the Deer Lakes School District has just signed a lease to allow shale drilling under school property. Why are you Martians so afraid of shale drilling? (see 
In February 2015, MDN did a deep dive into the issue of Pennsylvania leasing underneath rivers and streams to allow Marcellus/Utica Shale drilling (see 
Earlier this week we had some fun telling you about Hilcorp’s request to drill under a quarter of an acre of a cemetery in Columbiana County, OH (see 
Belmont County landowner Curtis Wallner doesn’t know what the term “nuisance oil” means in the contract XTO Energy is offering him to lease his 26 acres. The contract says Wallner will receive an eye-popping $8,000 per acre in signing bonus money, plus 20% royalties, MINUS revenue for “non-commercial nuisance oil.” Because XTO can’t or won’t explain it or remove it from the contract, Wallner won’t sign (can’t say that we blame him). So XTO is threatening him that they’ll take his gas anyway via forced pooling… 
A court case decided earlier this week by New York’s Court of Appeals (NY’s highest court), will, in our opinion, have a profoundly negative effect on oil and gas development in the state, forever. Or until another court case overturns it (which seems very unlikely). The case, as its core, is about the question of whether or not state action or inaction constitutes an extraordinary action, in essence an Act of God outside of the control of parties who sign a contract. Years ago landowners signed leases to allow oil and gas drilling, often for a few bucks and acre, long before Marcellus and fracking were common, household words. Then came delay after delay in New York–from the governor–and eventually a more or less semi-permanent ban on fracking. Energy companies argued that the leases they had signed could be extended until the day they are allowed to drill in the Marcellus because of “force majeure”–the concept that due to circumstances beyond our control we could not drill as we intended during the original term of the lease, usually five years. The NY Court of Appeals on Tuesday decided that the state preventing drilling does not qualify as force majeure after the original five-year period of a lease (full copy of the decision below). If the original lease was extended for some reason and then the driller was prevented from drilling during the extended time due to state laws preventing it, it’s not force majeure in the eyes of the “wise” justices in Albany…
The Vikings are Coming! Er, well, at least the Norwegians are. And they’re not coming to conquer but to drill–underneath the Ohio River in West Virginia on the border of Marshall and Wetzel counties. The West Virginia Department of Commerce has cut a deal with Norway-based Statoil which allows the company to drill and frack for oil and natural gas on 474 acres thousands of feet beneath the Ohio River. What are the lease terms? An average price of $8,732 per acre with 20 percent production royalties. That translates into a signing bonus of $4.14 million. And that’s not all. WV is near to signing a deal with Noble Energy and Gastar Exploration on two other Ohio River tracts that will provide lease bonuses of $4.9 million and $749,000 (respectively) along with 20% royalties…