Chesapeake Gas Caught Defrauding Royalty Owners-Lawsuit Judgement in North Carolina - $405 Million BucksSomervell County Salon-Glen Rose, Rainbow, Nemo, Glass....Texas


Chesapeake Gas Caught Defrauding Royalty Owners-Lawsuit Judgement in North Carolina - $405 Million Bucks

19 February 2007 at 11:28:50 PM

You really have to read this entire article to see all the devious Enron-ish ways Chesapeake (which is 3rd biggest energy company behind Exxon-Mobil and ConocoPhillips) and NiSource tried to game the system while screwing royalty owners out of their money. It's also notable that it isn't just individual land owners, but also businesses.

The Roane County Circuit Court jury found in the case that a gas producer called Columbia Natural Resources LLC — which was once owned by NiSource, but now belongs to Chesapeake — underpaid royalty owners by $134 million and deserved to pay $271 million more in punitive damages.

Of the nearly 9,000 plaintiffs in the class, about 150 are businesses. Among them are major landholding interests such as Cotiga Land Co., Dingess-Rum Properties, Horse Creek Coal Land Co., Horse Creek Coal Co. (which is unrelated to Horse Creek Coal Land), the Klosterman Trust and D.C. Malcolm Inc....

The suit, filed in 2003, alleges that CNR operated wells removing gas under leases with the plaintiff landowners, but did not properly inform them of the true value of gas being extracted.

It also maintains that NiSource forced CNR to sell billions of cubic feet of natural gas in advance of NiSource’s 2000 takeover of CNR parent company Columbia Energy Group. The advance sale generated money needed to help finalize the transaction, according to the suit. ..

NiSource got $400 million upfront, which it used to pay off Columbia Energy debts, in part to gain approval for the deal from the federal Securities and Exchange Commission.

That deal also was used to provide $150 million in “golden parachute” retirement benefits to a handful of Columbia Energy officers.

During the trial, two former CNR presidents testified they were forced, under orders from NiSource, to sell West Virginia gas rights to a company called Mahonia II, based in the Jersey Islands, off the coast of France. That deal involved payment for anticipated future gas production.

“If NiSource and Columbia Natural Resources wanted to engage in speculative Enron-type deals, they had every right to do so, but not on the backs of the royalty owners,” said Segal.

“If they can find a way to deprive regular people who have been cheated of a way to get to court then Enron-type scandals will continue to flourish,” Segal said.

P.S. As expected, Chesapeake, the loser, threatened retaliatory action against North Carolina in the form of business.

Chesapeake Energy Chief Executive Officer Aubrey McClendon said a $404.3 million jury verdict against the company and others has not only caused Chesapeake to put its plan to build a regional headquarters in Charleston on hold, it has also prompted him to reconsider the company’s exploration program in West Virginia. On Jan. 27 a Roane County jury said Chesapeake Energy, Columbia Natural Resources and NiSource Inc. had cheated 8,000 landowners out of $134.3 million in natural gas royalties. The jury also said the companies had committed fraud and awarded the landowners $270 million in punitive damages. “We’re just finishing up the first large three-dimension seismic survey ever shot in West Virginia which, ironically is in Roane County,” McClendon said. “So we’re kind of scratching our heads about what to do with it. “We own most of this acreage already — it’s called ‘held by production by shallower wells,’” he said. “So in terms of timing, if we want to sit on this for the next 20 or 30 years, we can certainly do that. “I’m not willing at this point to commit to a big new exploration program in the state of West Virginia when I don’t know how the leases that I’ve inherited are going to be interpreted by judges across the state. “We’ve got to get definition on that and I’ve asked Gov. (Joe) Manchin to get out in front when the bill hits the Legislature and we’ve asked legislative leaders to support it as well,” McClendon said. The industry bill, “The Fair Production Royalty Payments Act,” is expected to be introduced this week.

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1 - ricky   22 Oct 2008 @ 4:44:04 PM 

They have just screwed a bunch of us in North Louisiana, after signing letters of intent to lease our land, which was written in no uncertain terms" lessor may NOT accept any other offers, once CHK accepted our intent letter.  

All of us did receive other offers, but declined, due to what we took as a contract in good faith

 One day before signing the lease, they backed out and are refusing to talk to us.

2 - David Hurd   19 Jul 2009 @ 12:35:34 AM 

After reading this, my suspisions that Chesapeake is not paying proper royalties to me and my neighbors, has been heightened. We are recieving considerably less per MCF than some of the other royalty owners that are leased by other companies such as EOG. Johnson county, Texas. Barnett shale. 

3 - Mary   23 Sep 2009 @ 6:25:24 PM 

To Ricky above:  Your story sounds very, very familiar to me!

To David Hurd above:  I'm glad for you that you at least got your lease money.  I am in the Burleson, TX holdout group...still waiting, waiting, waiting!

4 - Joy   11 Nov 2009 @ 6:46:04 PM 

We (husband and I) have 175 acres of timberland in WV. Chesapeake made a deal for the FIRST well in 2006. We were told by two representatives we would first get money based on foresters estimate for the trees they felled (nice, big hardwood trees); then we were free to sell them to the timber co. of choice; then we would be paid per foot of pipe going through our prop., plus damages. We have yet to receive anything! We were stupid then, and again last year when noticed of another well. Supposedly, this well is on a neighbor's property which abuts ours, but my husband is up there now, and it sure appears as if it's on ours (no one in this area has ever had a true survey done). This time, they felled many more trees than before, plus put in a road which has allowed the piracy of the trees which are our retirement! (My husband is 61 and I'm 55, and we for now are stuck in FL unable to sell our home to move to this land of our dreams due to the economy and overbuilding in this part of FL.) This is all new to me, but I'm finally investigating just to find out how much $ per foot of pipe thru our prop. they should be paying us. I'm willing to take it to court, but 3 attorneys called have not been receptive. What is the avg. $ per foot for natural gas in an area which apparently is very fruitful, since they have a number of nat. gas wells all around our prop., including our own?

5 - Josh   27 Apr 2010 @ 2:21:39 PM 

@Joy, the few pipeline right-of-way agreements that I have negotiated, were usually in the range of $5-$15 per rod. Howver, this is something that is negotiable to an extent. I have done a lot of work for CHK in the past, and have not seen any problems in the area that I have worked. However, when acquiring someone else's leases, they may not have done a very good job on their due dilligence, and unfortunetely this is the end result. Damages should definetely have been payed, I would keep trying to contact them to get the issue resolved.

@David, there may be a difference in money received, depending upon the royalty that was negotiated. Some royalties are higher, but are a net royalty, and others may be lower, but are on gross production.

@Ricky, even if a lease is signed and executed, the Lessee(CHK, EOG, etc..) has the right to terminate the lease at any time. Unfortunetely not all Landmen will explain all the details of a lease, and if you get an attorney, not all actually know much regarding an Oil & Gas Lease.

6 - Bill   4 Jul 2010 @ 12:38:52 AM 


Because they have breached the agreement, I'd hire an attorney (from chi or ny) and notify the energy company to cease and desist immediately.  Notify them that their equipment and piping on your land will be forfeited and auctioned in partial renumeration for the damages caused to date.  Then I would file a breach/fraud/rico complaint against them in your state's capital in federal court.

7 - Edward   17 Aug 2010 @ 7:42:39 AM 

We signed a lease with chesapeake in April 2010. Our 120 days to recieve payment has expired. They are cutting the check is the comment from their rep. Do we sue for breach of contract. They are pumping gas from the marcellus shale beds up here in Bradford County. Who is monitoring their output and payment?We purchased another property based on this lease money, Thank God we can pay it without their lease check.I feel they have no reguards for their lease or in giving us any information on the gas production up here.

8 - Tracey Cockburn   17 Aug 2010 @ 6:46:07 PM 

August 17, 2010

Chesapeake has not been sending me my oil royalties, in fact after speaking with one of their employees this afternoon, I found out that they have been holding some of my royalties since 2004. The employee could not tell me when I would receive my royalty check, just that I would receive it at some time in the future. I believe Chesapeake has been makng money holding my oil royalties and they are untrustworthy.

9 - Jim Winchel   27 Aug 2010 @ 3:15:35 PM 

My family and I have been approached by Chesapeake to renegotiate a lease on drilling/mineral rights to a 22+ acre tract near Cameron, West Virginia.  Is anyone receiving royalties from the Marcellus Shale gas drilling that's going on in that area now?  If so, what rate are you receiving; they've offered us 12%, net, but we feel that's a bit short.  Comments?  What should we be offered?  Knowledge is power; these people seem to be adept at keeping us in the dark and I really would like to have my ducks in order when I discuss this with them.  Thanks! 

10 - Ron Tucker   31 Aug 2010 @ 10:49:54 AM 

I purchased 17 plus acres from my mother. Oil gas lease held by CHK do to renew in Nov. 2010. Mom got the lease up front but no Royalty what so ever all this time. Land is in Jackson Co. Arkansas. Talked with mgmt. agent on phone several months back who said CHK was not going to renew the lease. Would like any feedback from other owners near us.    RonT.

11 - charles amos   3 Sep 2010 @ 1:01:44 PM 


chesapeake has offered me 3800 an acre in near by wetzel county, i have 120 acre  near new martinsville wv. also also tell them you want 15 to 18 percent GROSS royalties. donot settle for net royalities. the difference is they deduct for their cost, which translate to 4 to 8 percent so at 12.5 net royalities you only really get about 4.5 to 8.5 gross.

12 - Cliff   5 Dec 2010 @ 9:15:00 PM 

  Now , That I have found this sight , My suspitions grow more and Hope It won't be that way any more.


  For I have just signed with CHESAPEAK APPALACHIA, L.L.C. surviving enity of merger Columbia Natural Resourses,L.L.C.called "Sublessee" acknowledged and agreed by Columbia Gas Transmission, L.L.C.( Columbia")., and Nisource Energy Ventures, L.L.C. ( "NEVCO")., Called "Sublessor":

  Now  the above News

Chesapeake Gas Caught Defrauding Royalty Owners-Lawsuit Judgement in North Carolina - $405 Million Bucks

  Makes all 3 of the on the lease I signed  40 Acer 12.5% Net, Mailed off 12th Nov.

for Land in WV Marshall county  wich now after mailing lease I find out Now that it could be worth more , Hope Fair Market Law is past .

I also got a Columbia Gas Transmission check for $ 3.00 Mothers name ,who is past-away. It said it is for Land Assets. Now that I know Fair Maket Can I renogateate my Colubia Gas Lease @ $10.00 per ft as But do not have lease mother sent > Do they Have to send me her lease agrment Now that I am her Hier, So I can read it ?

13 - Tammy Kramer   30 Dec 2010 @ 6:54:51 PM 

I'm in Johnson County, TX and my neigborhood was 1 of the first contacted for drilling for the Barnett Shale.(This was in Dec of 2006)  We were offered $200 as a signing bonus and were told  if we didn't sign, the drilling would proceed anyway as the TX RR Commission had already given approval, so we might as well sign & get the $$. (Half my neighbors had never even heard of Barnett Shale) Due to the way the landman presented the pitch, no matter what decision you made, the drilling would proceed even if you were against it. OK, no brainer, sign the lease. 6 wells were to be drilled.

I received my $200. 3 wells and 4 yrs later in Feb 2010 I received documents from Chesapeake which required me to send all kinds of paperwork to my bank to allow me to receive proceeds from the wells since  the bank is the lein holder. Not to mention the time it took to complete the paperwork and get it submitted, etc., it ended up costing me $173 for bank fees and postage.

In June of 2010 I received notice from Chesapeake that additional wells were secheduled to be drilled.  As of today it looks as if drilling is complete with 6 wells and the drilling site beign dismantled. However so far I have NO information on well production, NO money from the leases and to add isnult to injury, I have received my property taxes for 2010 and I am being TAXED on my 3 wells !!!!!!

After deducting all my expenses from my original $200 signing bonus I now am at $ -22.88.

And this is a good deal how??????


The plan was for 6 wells

14 - boo jo   24 Jan 2011 @ 9:39:57 AM 

How do you handle (possibly decades) of gas royalty shortfalls? These wells are located in Buchanan Co. Va.   Another energy corp (Range) took over operations when CHK bailed rather unexpectedly in 2010.We own a small portion of land( 21 acres),but are heirs of mineral rights (1/7 th) for another 840 acres,where there are 21 wells producing.Can production figures be falsified??My royalty check(50 bucks in Jan) began dwindling at an alarming rate as CHK began selling out of this area.Range,CHK,before that it was Penn. Correspondence with CHK provided only the run around and double talk,if calls were returned at all. The same thing occured in West Va, except enough people got together with a case that CHK was forced to ante -up for royalty inproprieties. I dont live in Va,but geographical absence does not equal stupidity. Energy production in these mountians will continue, it has for a long,long time.A poor man will take what they`ll give em,as they trash his drinking wells with frac drilling.Isn`t there a class action going against CHK in VA,like the one settled in WVa?Does anyone know? anyone interested?

15 - Kevin B. Koonce   31 Jan 2011 @ 9:43:50 PM 

Chesapeake Energy and RedSky Land continue to cheat mineral owners.


16 - pat jones   19 Feb 2011 @ 11:45:34 AM  we live in bradford county Pa. and are not at all happy with our lease. We were more or less told by someone representing chesapeake tht if we didnt sign our gas would be taken out from under us anyway so we might as well get some money for it. We signed for lesss than 90 dollars per acre.

17 - shawn   29 Apr 2011 @ 11:16:05 PM 

I lOhio, Chesepeke has told me I dont have enough land to build there pumping station,They are just looking to lease the right of way for there lines to travel thru my property,   The rep that was hear said it was a 8000 dolar bonus plus monthy dividends for 5 years,   But if we went with a 5+5 lease after the first 5 years were up they'd pay another 8 grand,   I would love to talk to someone that has leased to chesepeke but they told me they couln't give out that info.  I would love to here all comitts on this company  I am sorry if I'm bringing up what alredy been talked about but we just talked to them have not commetted to anything yet

18 - Jan Butz   19 Jul 2011 @ 2:08:18 PM 

I hope this information is not true.  We are expecting our initial payment by August 15, 2011.  All of the people writing to complain should be writing to the Attorney General in Washington and their state reps.

Vengence is mine, sayeth the Lord.  Everybody answers for what they do.

19 - Glenda Ramsey   11 Sep 2011 @ 2:58:08 PM 

Where is it written that Chesapeake can come swooping down on its royalty owners and arbitrarily flaunt the law to get tons of money from "our minerals" and leave us with a pittance?  Everywhere one reads, the pattern with Chesapeake is the same:  They underpay their royalty owners, and have no regard for leases that have been signed, left hanging, or ignored.  Now to add insult to injury, on top of being underpaid royalty owners, Chesapeake has notified Barnett Shale lease holders that they can expect a 25% reduction in royalties starting with the July 2011 check.  My first deduction amounted to $67, which over a period of one year adds up to a whopping $800 in deductions.  My question is:  who stuck a gun to Chesapeake's head and forced them to let the huge French oil company, Total, acquire 25% of Chesapeake's share (for around $2.5 BILLION)?  Why were we lease holders not "notified of THIS activity" nor given the courtesy of a vote on this action.  Apparently, because Total was going to charge post-production charges to Chesapeake, they decided to turn around and dump that charge onto royalty owners.  Is this legal?  Doesn't all  this essentially change our leases?  We were not informed; this was thrust upon us with no regard for our rights or our preferences.  As I asked earlier, who is watching the underhanded tactics that Chesapeake uses?  Are they accountable to anyone except themselves and their cronies?  Are they above the law?  They certainly are experts at flaunting the law. This leaves royalty owners feeling helpless to do anything about something they know is inherently wrong here.   

20 - none   30 Sep 2011 @ 10:36:29 PM 

so basically they can take the gas no matter if they pay you or not. You do realize that all this mess is killing people. We need to find a way to stop them. Class action?

21 - L. Rader   3 Oct 2011 @ 1:37:43 PM 

Here in Burleson, Texas we signed years ago and got a whopping $250 check and then nothing for years and then we actually got a check for $1.00 - if I hadn't really needed money due to being laid off I would have laughed it but it really was not funny at the time.  We finally started getting "royalty" checks earlier this year and each month they are less and less - I feel like they are going to end up with another class action suit like the one in North Carolina before long.  Something sure seems wrong here with the way the amounts keep going down monthly on these so-called "royalty" checks - anyone else in Burleson, Texas, Johnson County got a similar story?

22 - L. Rader   3 Oct 2011 @ 1:42:47 PM 

Hi, none - I agree - this company needs a class action suit slapped on it and fast.  I am sick of these greedy corporations barging in and doing whatever the hell they want and then screwing the citizens over.   I just posted but it has not shown up yet - anyone in Johnson County, Texas that is interested in acquiring an attorney to look into this company, please contact me at  I would be interested in hearing from you and your experience with this company.  How do they sleep at night is what I am wondering - guess when you do not have a conscious, it is not a problem.  :(  Also, if posters from other states want to get involved or have an action already under way, please let me know how I can get on board, please!

23 - sherry carpenter   24 Apr 2012 @ 9:03:07 AM  i and my family members . got really no money when they cheasapeak , came drilled on our land of 196 acres too: iwould like to file a lawsuit too : i want my share back.. plus they should stop this damn land run in oklahoma. i wish one year. bunch of us natives step in front of them. this is disrepectful to us too. i would like to hear. what other natives think of this.

24 - Scott   2 May 2012 @ 5:36:49 PM 

This is scary! I have 11 leases with Chesapeak for well over 2 years and have not seen one cent in royalties. Also, Chesapeak had enough people in our neighborhood to sign inintial leases, that we all gout our first "bonus check". Now, they are saying there are not enough people who want to renew there lease, so they are not paying to renew. it makes no common sense that someone would say they did not want another 5k! I am getting scammed. Anyone herd of attorneys in Texas looking at this?

25 - salon   14 Mar 2013 @ 7:28:49 PM 

Have to add a new article I saw today in the Fort Worth Star-Telegram, where Chesapeake is being sued  again. Basically, allegedly, Chesapeake was (is?) gaming the system by using their own middlemen to sell gas, and they were also taking FROM the royalty payments some costst that weren't in the contract,  thus underpaying the royalties due to the lessees.

But Chesapeake allegedly underpaid those royalties, improperly passed along production costs and made up "sham transactions" with two affiliate companies for the sale of gas at the wellhead to set the price on which royalties were paid, breaching the terms of the lease, the lawsuit contends...

Under lease terms, Chesapeake was not allowed to pass along "any part of the costs or expenses" of gathering the gas, transportation, production, or other manufacturing or processing costs, the suit says.

Furthermore, Chesapeake "did not actually incur" any post-production expenses, yet it passed 75 cents per Mcf in costs along to the lease holders. Chesapeake was to collect the gas "free of all costs" to the lease holders, the suit says.


With regard to the wellheads, Chesapeake was selling gas to Chesapeake affiliates Chesapeake Energy Marketing Inc., which sells the gas to third parties, and Chesapeake Midstream Partners, which provides gas-gathering services, as a way to "suppress" prices on which it pays royalties and still passed along production costs to the lease holders, the suit says.

Yup. Sounds like they were selling the gas to themselves at lower prices, using THAT price to pay back royalties and then the affiliates were selling the gas at higher prices. Gaming the system. At least that's what the lawsuit alleges.

Read more here:



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26 - regina alford   12 Jan 2015 @ 8:01:09 PM 

we as our family are being riped off since 4 years ago ?by chesapeake but ifevery one go to da mcdonald attorany for texas hes in the phone book ,and you can ask for his help hes good attorany so just call him and tell him about your case hell work for you to,

27 - salon   13 Jan 2015 @ 1:04:13 PM 

Well, can't say that I recommend anyone in particular, regina, but I'm glad you found someone. Seems like, based on how many people come here to look at Chesapeake leases, it's a problem for a LOT of people. 

Latest Blog Post by salon -Why are Paul Manafort's defense attorneys helping Lev Parnas and Igor Fruman today?
28 - Dean Krokum   29 Feb 2016 @ 4:19:06 PM 

They drilled all around us and we never got a lease with them or anything

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