Gas Wells Can Cost You: Glenn Aikens of Bradford County, PA

Published on Nov 4, 2014

Mr. Aikens received checks for ten cents and $1.10 from a division of Chesapeake Energy as royalty payments for his three Marcellus shale gas wells, after the company deducted post-production costs from his royalty payments.

Read the full story here.

"In Litchfield Township, Glenn Aikens, a member of the Bradford County Planning Commission, also has three shale gas wells on his land. Signing a lease brought a host of unexpected costs, Aikens says : $22,000 to set up an L.L.C. to make sure that his children could inherit the farm's suddenly valuable acreage in spite of estate taxes, pre-drilling water testing for the farm's seven wells (“He charged me $14,500 dollars, but I wouldn't have had a leg to stand on had I not,” says Aikens. “If they ruin the water, what do I do with this farm?”), and perhaps most painfully, the permanent loss of a valuable tax credit for farmland, now that the leased land is considered commercial property instead. Land that was assessed at $500 an acre was now assessed at $2,500 – and taxes were due retroactively."

Mr. Aiken had to pay literally thousands and thousands of dollars for the privilege of having gas wells on his property.  One royalty check from Chesapeake Energy was for 10¢.  The cost of testing the water was $14,500.  Does this sound like a lucrative enterprise for a land owner?

Royalty=10¢

Unfair Share: How Oil and Gas Drillers Avoid Paying Royalties

by Abrahm Lustgarten
ProPublica, Aug. 13, 2013

"Don Feusner ran dairy cattle on his 370-acre slice of northern Pennsylvania until he could no longer turn a profit by farming. Then, at age 60, he sold all but a few Angus and aimed for a comfortable retirement on money from drilling his land for natural gas instead.
It seemed promising. Two wells drilled on his lease hit as sweet a spot as the Marcellus shale could offer – tens of millions of cubic feet of natural gas gushed forth. Last December, he received a check for $8,506 for a month’s share of the gas.

Then one day in April, Feusner ripped open his royalty envelope to find that while his wells were still producing the same amount of gas, the gusher of cash had slowed. His eyes cascaded down the page to his monthly balance at the bottom: $1,690.  Chesapeake Energy, the company that drilled his wells, was withholding almost 90 percent of Feusner’s share of the income to cover unspecified “gathering” expenses and it wasn’t explaining why."

Read the article here.

Gas Royalties in Texas: New Deductions Affect Royalty Checks

Chesapeake Energy has decided to deduct post-production costs from royalty checks in the Barnett Shale Play in Texas.  About 20,000 royalty owners will likely see their royalty checks slashed by roughly 25 percent after the company deducts expenses associated with post-production, such as gas gathering, compression, and transportation, according to the Star-Telegram.  The changes took effect with the July royalty checks, based on May production.  Only those leaseholders who have specific clauses precluding assessments for post-production costs will be exempt from this new policy. Would you like to read the letter they sent to landowners who have signed leases with them?  Here it is:  http://www.askchesapeake.com/Barnett-Shale/Royalty-Owners/Pages/Gathering-Deductions.aspx

Chesapeake Energy can do this with leases that do not specifically prohibit the assessment.  That's how it works.  Pennsylvania, watch out.

A related article from the Fort Worth Star-Telegram

Read Sue Heavenrich's blogpost on The Marcellus Effect.

PA Landowner Appeals To the State Supreme Court

Tomorrow one Pennsylvania landowner from Susquehanna County will take his grievances to the state Superior Court. More than 70 lawsuits have been filed in federal and state courts by plaintiffs seeking a judgement that the leases signed were never valid. The issue is all about royalties. The state law requires that all land owners receive 12.5 %, or one-eighth, minimum royalty from the production of oil and gas on their land. The controversy arises when gas companies subtract costs, such as taxes, assessments, or transportation, BEFORE paying the 12.5 % royalty. Is this a violation of state law? The land owners say yes. And they feel that the gas companies came in and took advantage of them at a time when very few people knew anything about the Marcellus shale. However, the law does not define "royalty" in clear terms. Is it before or after expenses? David Fine, lawyer for two gas companies, maintains that it is standard language in leases to deduct costs, but this is disputed by land owner advocates in PA and elsewhere. Two cases in lower courts rendered different legal opinions. Mr. Fine asked the state Supreme Court to take up an appeal, Kilmer vs. ElexCo, immediately in hopes of settling this question for all future cases. One problem is that records of oil and gas leases dating back to the royalty law of 1979 are kept in county courthouses, often in arcane filing systems, making it very difficult to know how many land owners and leases would be affected.

Let the fun begin!

Read the full article by Marc Levy, The Associated Press, here.

DEMAND ACCOUNTABILITY!
ARE LEASES WORTH THE PAPER THEY ARE WRITTEN ON?

Your Check Is In the Mail

The weeds may grow very tall around your mailbox before your royalty check arrives. Find out why.

Read Peter Gorman's original blog post, "Barnett Shale Mailbox Money," here and Texas Sharon's award-winning blog commentary here.

DADDY, HOW MUCH MONEY DID YOU GET WHEN YOU SOLD OUR CLEAN WATER AND AIR?