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Chesapeake Energy Besieged with Lease Compliance Issues

Oil and gas companies often struggle with the vast amounts of information inherent in day to day business. We took notice last week of an article in The Examiner reporting that in Pennsylvania, Chesapeake Energy is losing “its hold as the market leader within the state,” as it reduces drilling by more than half this year. The company has of late been selling off shale gas assets to meet debt obligations, and they say drilling reductions are due to low prices for natural gas. Meanwhile, the company is facing “allegations of price fixing in Michigan while increasingly besieged with landowner lawsuit claims of underpayment of gas royalties and related leasehold disputes,” and these data issues more than likely are contributing factors to their declining market position.

Unclear data and reporting has popped up more recently in Pennsylvania for Chesapeake Energy, The Examiner reports.  According to state officials, Chesapeake submitted a production report to the Pennsylvania Department of Environmental Protection that was filled with errors. “This caused great confusion within the state regarding actual production and has called into question oversights as to how accurate such production data might be.”

The article also related Chesapeake’s recent statement to Pennsylvania lease holders that they have the “right to deduct certain post production costs from a landowner’s royalty check payments if it can show such costs “enhance” the value of the shale gas.” The issue remains a bit murky, as land owners insist their royalty payments were meant to be based solely on the volume of gas produced at the well head. Legal action will probably be required to sort the issue out.

Is the company’s new policy in compliance with the leases of the land owners? Without good information, this may be hard to tell. Chesapeake is not alone in their struggle to maintain accurate data. How long would it take your company to unravel either of these issues?

Get started now with our Lease Compliance White Paper, and find out how you can get ahead of the curve!

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