In Pennsylvania, Gas Company Complaints Grab Statewide Attention

One of the biggest natural gas companies in the U.S. is facing legal trouble over allegations it cheats landowners out of royalty money. Chesapeake Energy has faced similar accusations across the U.S.

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Pennsylvania landowners say one of the nation's biggest natural gas companies has cheated them out of gas royalties. The company is Oklahoma-based Chesapeake Energy. It's faced similar accusations and lawsuits in about half-a-dozen other states.

As Marie Cusick, of member station WITF reports, Pennsylvania's governor wants to take a harder look at the allegations.

MARIE CUSICK, BYLINE: Most of Chesapeake's Pennsylvania operations are located in a rural area in the northern part of the state, stretching along the New York border. Dave DeCristo is a businessman who's done a lot of work with the gas industry here, selling supplies for fracking operations. He'd be the first to say drilling has brought prosperity to the area.

DAVE DECRISTO: This has been probably the best thing for Pennsylvania since, you know, the first time they found the first oil well.

CUSICK: But DeCristo also owns a lot of land. He's leased about 1,200 acres to more than half a dozen drilling companies. The desk in his office is littered with royalty statements. He spends a lot of time trying to make sure the numbers add up.

DECRISTO: Well, 70.

CUSICK: He points to a statement from Chesapeake and says he believes the company miscalculated his royalty, so he tries calling the landowner hotline. He says he almost never gets an answer.

(SOUNDBITE OF PHONE RECORDING)

UNIDENTIFIED WOMAN #1: The Chesapeake contact center is currently experiencing a large volume of calls.

CUSICK: The company also declined requests to comment for this story. DeCristo is preparing to sue Chesapeake. He expects Pennsylvania's attorney general will find evidence of fraud.

DECRISTO: We can't even verify any of these numbers. This state needs to protect us in a lot of ways.

CUSICK: This is how royalty payments are supposed to work: Before gas companies begin drilling, they often sign leases with the property owners. Once the gas begins to flow, those contracts dictate how much landowners are to be paid in royalties. It's usually a percentage of the money the company makes from selling the gas. But there's a catch. Drillers are allowed to withhold some of the money to cover the costs of processing and transporting gas. You can think of it sort of like shipping and handling fees.

Chesapeake is Pennsylvania's biggest driller. Unlike many other gas companies who also pay royalties, it has been widely accused of charging landowners exorbitant fees and withholding a lot of money. Frustration over the issue recently sparked a rally outside the Bradford County courthouse, with landowners pushing for legislative action.

UNIDENTIFIED WOMAN #2: The only way that the landowners are going to get protection is by having this house bill.

CUSICK: Meanwhile, Pennsylvania's governor, Tom Corbett, who is a strong supporter of the gas industry, sent a letter to Chesapeake, saying he's heard complaints its business practices are, quote, "unfair and perhaps illegal." Lieutenant Governor Jim Cawley says the administration also supports making changes to state law to try to protect landowners.

LT. GOV. JIM CAWLEY: This practice just seems to be so egregious on its face that changes need to be made.

CUSICK: Adrian King of the state attorney general's office says its public protection division has started looking into the matter.

ADRIAN KING: If there's action to be taken to protect Pennsylvanians and make sure that they are not being treated unfairly or with respect to fraud, if there's fraud, we'll take appropriate action.

CUSICK: Chesapeake's CEO recently sent a letter in reply to the governor, saying he's aware of the complaints and takes them seriously. The company has also agreed to settle a class action lawsuit over royalties in Pennsylvania, but that deal still awaits the approval of a federal judge. For NPR news, I'm Marie Cusick.

CORNISH: This story comes to us from StateImpact Pennsylvania, a public media reporting project focusing on Pennsylvania's energy economy.

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