PA Settles Natural Gas Royalties Lawsuit
On Monday, Pennsylvania Attorney General Josh Shapiro announced Monday that the commonwealth had reached a settlement in its lawsuit brought against Chesapeake Energy, a large natural gas drilling outfit.
The lawsuit claimed that Chesapeake had incorrectly deducted post-production gas processing expenses from landowner royalty checks. The lawsuit also claimed that Chesapeake and another company, Anadarko Petroleum, split up markets to keep landowners from receiving competitive offers for their mineral rights.
The settlement calls for Chesapeake to pay $5.3 million in restitution and correct its royalty payment calculations and leasing practices going forward.
If you have a royalty interest in an oil and gas lease, you generally have the right to inspect the Company’s royalty calculations and other relevant documents and records that factor into your royalty check. The terms of oil and gas leases vary significantly. For example, some leases pay “gross” royalties to landowners based on production figures as measured at the wellhead, while others might allow the company to deduct certain transportation or processing costs in the royalty calculation.
If you think your royalty check is lower than it ought to be based on your lease agreement, consider hiring a qualified CPA to inspect the books and records of the production company on your behalf. Leases may include provisions that if the production company significantly underpaid you, they also become responsible for your accountant’s and attorney’s fees to recover the underpayment.
Schreiber Accounting and Advisory has experience performing oil and gas royalty audits and is ready to discuss your options for investigating and recovering any underpayment owed to you. Contact the firm for more information.
Material discussed is for informational purposes only. It is not to be interpreted as investment, tax, or legal advice. Individual situations vary, and this information should only be relied upon when coordinated with individual professional advice.