Chesapeake Energy Settlement FAQs

After receiving hundreds of complaints from landowners involving natural gas leases and royalty payments, the Office of Attorney General investigated and ultimately filed a lawsuit against Chesapeake Energy in 2015. The lawsuit alleged that Chesapeake Energy:

  • engaged in unfair and deceptive practices in securing leases and underpaying royalties
  •  took deductions for post-production costs when landowners were told that were no deductions
  • took unreasonable deductions when landowners were told that there were deductions
  • provided misleading information or otherwise failed to disclose information regarding competitiveness and fairness of the offered terms

Blue SealFrequently Asked Questions

A: This settlement provides:

  1. An opportunity to select a new option for how your monthly royalty is calculated:
    1.  MEC and Ready for Sale or Use Leases – Landowners can choose to always be paid royalties based on the higher of two prices: the In-Basin Price, which is based on local index prices (50% Leidy Hub and 50% TGP Zone 4) with no deductions, or the NetBack Price which is the price Chesapeake receives for its production month sales to third parties minus a proportionate share of the Post-Production Costs that Chesapeake incurs. If landowners do not select this new “always best price” option, they will continue to be paid as they have been paid – the NetBack Price. 

    2.  Non-MEC Leases – Landowners can make a one-time choice to be paid royalties going forward either the In-Basin Price, which is based on local index prices (50% Leidy Hub and 50% TGP Zone 4) with no deductions, or the NetBack Price which is the price Chesapeake receives for its production month sales to third parties minus a proportionate share of the Post-Production Costs that Chesapeake incurs. If landowners do not select the new In-Basin Price option, they will continue to be paid as they have been paid – the NetBack Price. 

    3.  Prohibit Deductions Leases – – If Chesapeake is taking deductions on the small subset of leases that prohibit deductions, it will stop taking deductions from royalty payments on these leases. 

  2.  A small one-time cash payment based on your lease’s royalty provision: 

    1.  Landowners with MEC leases, Ready for Sale or Use Leases and Prohibit Deductions Leases will receive about $700. 

    2. Landowners with NonMEC Leases will receive about $367.
  3. Improved protections for landowners through:
    1. A new Ombudsman selected by the OAG and Chesapeake to respond and seek to resolve landowner complaints;
    2. OAG Compliance and inspection rights so the OAG has access to Chesapeake’s books and records to ensure Chesapeake is complying with the terms of the settlement;
    3. Chesapeake’s annual reporting to the OAG regarding leases, gas production, deductions and any landowner complaints received.

A: Chesapeake filed for bankruptcy on June 28, 2020 in the U.S. Bankruptcy Court for the Southern District of Texas, Houston Division. The bankruptcy court stayed our state court litigation so it could not go forward despite our multiple requests to be excepted from the stay. On February 9, 2021, Chesapeake emerged from bankruptcy and the stay was lifted, but a discharge injunction was put in place that continues to prevent the OAG state court litigation from going forward. 

This settlement provides relief to landowners now (once it is approved by the bankruptcy court and is final), rather than several years from now. Without the settlement, the OAG would need to get approval from the bankruptcy court to go forward with our state court litigation, get a favorable decision from the PA Supreme Court, engage in discovery and try our case and get through appeals of the trial court decision. All the while, Chesapeake would continue to produce gas from Pennsylvania landowners’ wells and take deductions on the production from landowners’ royalty payments.

A: The OAG Chesapeake Settlement does not impact the OAG’s lawsuit against Anadarko which continues. The Anadarko lawsuit is before the Pennsylvania Supreme Court on Anadarko’s appeal for its decision about whether the OAG’s lawsuit can go forward under the Unfair Trade Practices and Consumer Protection Law. 

A: The OAG Chesapeake Settlement does not impact the OAG’s lawsuit against Anadarko which continues. The Anadarko lawsuit is before the Pennsylvania Supreme Court on Anadarko’s appeal for its decision about whether the OAG’s lawsuit can go forward under the Unfair Trade Practices and Consumer Protection Law.

A: No. It was negotiated on behalf of all Pennsylvanians that have leases with Chesapeake Energy and anyone with a Chesapeake lease may take advantage of the settlement terms. 

A: No. This settlement is completely separate. While landowners may be notified about participating in the AG settlement and the Class settlement by the same Claims Administrator, a landowner does not need to participate in a class action settlement to receive the benefits of the AG settlement. 

A: The settlement includes $5.3 million that will be distributed to landowners as a one-time payment. This means landowners with MEC and Ready for Sale or Use Leases will receive approximately $700.00 and landowners with Non-MEC leases will receive about $367.00. The Settlement Agreement needs to be approved by the bankruptcy court and be final before it is effective. We anticipate landowners will receive checks within 6 months of the effective date.

A: In order to verify claims and create individual settlement payments, the Commonwealth would have to contract with consultants and attorneys to process all claims — a time consuming and potentially expensive process. The cost to accurately determine payments would end up coming out of the settlement fund, leaving even less money for landowners. Rather than delay payments, and reduce the available money for Pennsylvanians, we prioritized getting the most money to landowners as soon as possible. 

A: The settlement will provide landowners with better payment of royalties moving forward. 

Landowners with MEC and Ready for Sale or Use Leases can choose going forward to be paid the higher of an In-Basin Price, which is based on local index prices with no deductions, or the NetBack Price, which is the price Chesapeake receives for its production month sales to third parties minus a proportionate share of the Post-Production costs that Chesapeake incurs. If a landowner does not choose to receive the higher of In-Basin or NetBack prices, the landowner will be paid as the landowner is paid now. For Landowners that choose the higher of In-Basin Price or NetBack Price, the In-Basin price and NetBack price will be computed monthly and whichever price is higher is what MEC and Ready for Sale or Use Leases will be paid. The monthly In-Basin Price will be posted semi-annually on Chesapeake’s website so landowners can verify pricing they received. 

Landowners with non-MEC leases will make a one-time selection of either In-Basin Price with no deductions or the NetBack Price. Whichever option they select, will be the price they receive every month for their natural gas royalty payments. 

A: The Office of Attorney General by law cannot provide legal advice to individuals, however, we will make public as much information as possible on this webpage regarding each option available to landowners to aid them in making an informed decision. We encourage landowners to consult with an accountant or legal counsel if they need assistance in determining what option to choose for future royalty payments. 

A: The individual will be selected by the Office of Attorney General and Chesapeake Energy. 

A: The ombudsperson will be paid by Chesapeake Energy and settlement terms state the position will be paid for 5 years. 

A: No, this settlement is only with Chesapeake Energy. Landowners with complaints about other companies should direct them to the Office of Attorney General. 

A: The Settlement announced in 2018 involved class actions. Those suits are unrelated to the Attorney General action being resolved here.