Pennsylvania sues gas driller over 'deceptive' leases

By Michael Rubinkam, Associated Press

Pennsylvania's attorney general sued one of the nation's largest producers of natural gas on Wednesday over claims it cheated at least 4,000 landowners.

Pennsylvania's attorney general sued one of the nation's largest producers of natural gas on Wednesday over claims it cheated at least 4,000 landowners who signed drilling leases with the company.

Oklahoma City-based Chesapeake Energy Corp. tricked landowners into signing one-sided leases in the early years of the Marcellus Shale drilling boom and then improperly deducted certain post-production expenses from their royalty checks, according to the lawsuit filed in Bradford County.

Chesapeake, the nation's No. 2 gas producer, engaged in a "bait and switch scheme" and "unfair and deceptive conduct," said the lawsuit, which seeks tens of millions of dollars in restitution as well as civil penalties.

Chesapeake denied the claims.

"We strongly disagree with Attorney General (Kathleen) Kane's baseless allegations and will vigorously contest them in the appropriate forum," Chesapeake spokesman Gordon Pennoyer said in a statement.

Landowners have been complaining for years about Chesapeake's business practices, and a settlement agreement between the driller and thousands of landowners is pending. Kane is seeking to modify the civil settlement so that her own lawsuit can go forward.

Kane's office launched an investigation nearly two years ago into complaints that landowners in northeastern Pennsylvania were being cheated of royalties, interviewing hundreds of landowners and sifting through their lease paperwork to decide who might have been defrauded.

"We have identified at least 4,000 landowners, but we expect the number could be considerably higher. We're hopeful that today's filing will lead other affected landowners we have not spoken with to share their concerns with the office," said Jeffrey Johnson, a spokesman for Kane.

The Marcellus Shale, a deep rock formation that hold the nation's largest known reservoir of natural gas, has turned Pennsylvania into the nation's No. 2 gas-producing state after Texas.

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