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Reuters: Chesapeake pumping up royalty deductions to cut costs

  • As the natural gas industry struggles with depressed prices, Chesapeake Energy (CHK) is shifting a much larger share of transportation and marketing costs to the owners of land it leases in Pennsylvania, according to a Reuters analysis.
  • The largest natural gas operator in Pennsylvania's Marcellus shale formation, CHK this year is taking much heavier deductions from royalty checks it sends landowners, in many cases cutting compensation by more than half.
  • Such deductions are made in other states, but an ambiguous Pennsylvania law has allowed CHK and others to push the practice further there, analysts and locals say.
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Comments (19)
  • KimFeil
    , contributor
    Comments (81) | Send Message
     
    I believe there is an interest in also placing the burden of environmental cleanup costs on the land owners leasing their land too...its only fair.
    28 Aug 2013, 01:11 PM Reply Like
  • Energysystems
    , contributor
    Comments (1658) | Send Message
     
    Still whining about fracking? Geez, get a life.
    28 Aug 2013, 01:14 PM Reply Like
  • zebra114
    , contributor
    Comments (251) | Send Message
     
    Some landowners in norteast PA are even getting bills, instead of royalty payments from CHK now. My opinion is that CHK will eventually go under and sell it all back to Aubrey. Lawsuits are piling up and CHK doesn't have sufficient insurance to cover their liabilities.
    28 Aug 2013, 01:20 PM Reply Like
  • NKP
    , contributor
    Comments (17) | Send Message
     
    I think they use GEICO so they should be covered.
    28 Aug 2013, 01:22 PM Reply Like
  • NYCTEXASBANKER
    , contributor
    Comments (2980) | Send Message
     
    ZEBRA

     

    Do you have any incite that the lawsuits are valid? Depending on the type of law suit if CHK wins from a land owner, the land owner may lose the control of their land to CHK.
    28 Aug 2013, 10:10 PM Reply Like
  • westelk
    , contributor
    Comments (341) | Send Message
     
    Well, what do you know? CHK's new management abuses its leaseholders even worse than Aubrey. What cultural shift? A business that continually screws its customers eventually fails or needs a taxpayer bailout.

     

    By then, as with many past Icahn forays, Icahn will be gone with a pile of money leaving a lot of people holding the bag.
    28 Aug 2013, 04:57 PM Reply Like
  • NYCTEXASBANKER
    , contributor
    Comments (2980) | Send Message
     
    westelk

     

    Could you inform us how you know leaseholders are abused versus being held to their contract?
    28 Aug 2013, 10:15 PM Reply Like
  • No Sympathy
    , contributor
    Comments (39) | Send Message
     
    What will Chesapeake do if we shut off the valves an lock the gates? Landowners will have the final say here.
    28 Aug 2013, 05:07 PM Reply Like
  • Jack Wildcat
    , contributor
    Comments (181) | Send Message
     
    Not if you signed a lease.
    28 Aug 2013, 05:16 PM Reply Like
  • NYCTEXASBANKER
    , contributor
    Comments (2980) | Send Message
     
    no sympathy

     

    In most states "shut off the valves an lock the gates" gets you jail time and probably you could lose your land.
    1 Sep 2013, 01:48 PM Reply Like
  • Factzplz
    , contributor
    Comments (266) | Send Message
     
    I attended the annual meeting in Oklahoma City, and spoke with a half dozen leaseholders - all were happy.

     

    How many leases were signed to assemble 40,000 sq. miles (gross) of leases by 5,000 landmen?

     

    Now there are a few (relatively) disgruntled leaseholders who are required to honor their obligations under the contracts that their attorneys approved -- and suddenly CHK will "go under?" These people could have signed leases with any oil company - but they did NOT - because CHK gave them the best deal of any oil company.

     

    So they will not get instantly rich? They did NOT buy a lottery ticket, they got cash up front + royalties. They did not cough up $8 million to drill a well, have geologists analyze the formation, or put together the pipelines, etc.

     

    The comments suggest that of hundreds of large drillers and thousands of small drillers CHK is the only company that has leaseholders honor the contract. Sorry, I do not believe it. Anybody have any proof that only CHK makes leaseholders honor contracts?

     

    Insurance? What insurance? Insurance to pay a claim if a leaseholders want to NOT honor their part of a contract? Does Zebra114 have any proof of insurance, much less too little insurance?

     

    Westelk - a bailout for an oil company? What oil company has ever received a bailout? What law authorizes the government to bail out oil companies?

     

    All these "smart" people - if you believe the gibberish you try to pass off as facts - take your life savings and short CHK. You will become fabulously rich (or maybe not).
    28 Aug 2013, 06:20 PM Reply Like
  • westelk
    , contributor
    Comments (341) | Send Message
     
    Do you understand the conjunction "OR" which is used to connect alternative terms for the same thing"

     

    A business that continually screws its customers eventually fails OR needs a taxpayer bailout.
    29 Aug 2013, 08:32 AM Reply Like
  • NYCTEXASBANKER
    , contributor
    Comments (2980) | Send Message
     
    westelk

     

    you have not answered my comment above, you continue to make in the words of factzplz the gibberish you try to pass off as facts
    29 Aug 2013, 11:29 AM Reply Like
  • Richard Waldren
    , contributor
    Comments (249) | Send Message
     
    Was it not about a year ago when the govt. coughed up about 1.4 B for the oil companies to do their thing. What a gig. Only in America.
    29 Aug 2013, 12:00 AM Reply Like
  • NYCTEXASBANKER
    , contributor
    Comments (2980) | Send Message
     
    Richard Waldren

     

    Could you be more specific as corporations in every field get money from the government for accomplishing a specific task.
    29 Aug 2013, 08:29 AM Reply Like
  • marpy
    , contributor
    Comments (1239) | Send Message
     
    The CHK way - short term gain for long term pain. It is only a matter of time before the legislature acts and CHk's hands are tied. If they had been reasonable they could have passed some costs along without making to many waves and most landowners would have accepted this and not complained.
    29 Aug 2013, 09:51 AM Reply Like
  • NYCTEXASBANKER
    , contributor
    Comments (2980) | Send Message
     
    Marpy

     

    Many legislators might not want to act because of the Supreme Court decision against the Corps. of Engineers this last year.
    In short I have a lease and then a legislative body says I can't use the leased land as I wanted to. The legislature must compensate me. New York state has that problem right now with its hold on fracking.
    29 Aug 2013, 11:25 AM Reply Like
  • Richard Waldren
    , contributor
    Comments (249) | Send Message
     
    NYCTEXASBANKER If I remember correctly a year or so ago some oil companies were getting approx. $1.4 B to explore for oil. This was in the congressional budget. There was a big howl about it and the oil companies said they needed the govt subsidy to look for oil. As I remember they got it. This was how I remembered it.
    1 Sep 2013, 10:39 PM Reply Like
  • NYCTEXASBANKER
    , contributor
    Comments (2980) | Send Message
     
    Richard
    Why don't you review the congressional budget, its a public document and find where, what , who got the 1,4bil that you remember. The main problem is politics which plays the word game. If depletion allowance (read depreciation in other industries) is increased those against the oil companies claim the government is giving money to the oil companies when in fact no money is transferred. This is the same thing when they raise your exemption amount on your 1040 the government didn't actually give you money. You sent them less.
    After your review you should be able to tell us what happened.
    2 Sep 2013, 04:20 AM Reply Like
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