Natural Gas Royalty Lawsuit
Frequently Asked Questions:
On August 30, 2021, Epiq, the Class Administrator, mailed Election Forms to landowners. The due date for making your election is November 29, 2021.
A: The OAG Settlement provides:
- An opportunity to select a new option for how your monthly royalty is calculated:
- MEC and Ready for Sale or Use Leases – Landowners can choose to be paid royalties going forward the higher of an 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 option, they will continue to be paid as they have been paid – the NetBack Price.
- 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.
- 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.
- A one-time cash payment based on your lease’s royalty provision. Given Chesapeake’s bankruptcy, these amounts are pennies on the dollar compared to what Chesapeake took from landowners as alleged improper deductions. The bankruptcy laws permit companies to discharge their obligations and reorganize to continue in business.
- Improved protections for landowners through:
- A new Ombudsman selected by the OAG and Chesapeake to respond and seek to resolve landowner complaints;
- 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;
- Chesapeake’s annual reporting to the OAG regarding leases, gas production, deductions and any landowner complaints received.
A: The settlement was approved by the U.S. Bankruptcy Court for the Southern District of Texas, Houston Division on March 31, 2021 and effective on April 15, 2021. Many of the settlement provisions take effect 60 days from April 15, 2021. You will receive notice of the OAG Settlement from Epiq, the Settlement Administrator for both the OAG Settlement and the Class Action Settlements. You do not need to participate in the Class Action Settlements to participate in the OAG Settlement.
he Ombudsman cannot provide advice on which option to select for future royalty payments. The OAG by law cannot provide legal advice to individuals, however we will make public as much information as possible on this webpage and on www.paroyaltysettlements.com regarding each option available to landowners. Historical In-Basin pricing information for 2017-2020 will be posted on www.paroyaltysettlements.com along with information on comparing the historical In-Basin pricing to your monthly check stubs for 2017-2020. Please note that past performance is not an indicator of future performance. Additionally, the historical In-Basin Prices are listed in MMBTUs and the prices listed on your check stubs are listed in MCFs. In order to compare the historical In-Basin Prices with the actual prices you received for natural gas production on your monthly check stubs for 2017-2020, you must convert your price in MCFs to a price in MMBTUs. You can do that by performing the following calculations.
- Locate a well on your check stub.
- Find the Prod Date (production date) for the well.
- Find the BTU/Price Column on the check stub.
- Multiply the BTU times .001. (example: 1027.25 x .001 = 1.02725)
- Divide the Price by the number calculated in Item d above (example: $2.33/1.02725 = $2.27).
- Now you can compare it to the In-Basin Price listed for that particular production month.
- You should do this exercise for all of the wells that you are being paid for.
We encourage landowners to consult an accountant or legal counsel if they need assistance in determining what option to choose for future royalty payments.
A: The OAG Settlement does not impact the OAG’s lawsuit against Anadarko which continues. The Pennsylvania Supreme Court issued a decision on Anadarko’s appeal on March 24, 2021. The Court determined that the Pennsylvania Unfair Trade Practices and Consumer Protection Law (UTPCPL) does not apply to Anadarko’s conduct involving natural gas leases as Anadarko was a buyer of natural gas mineral interests instead of a seller. The Court remanded the case to the Bradford County Court of Common Pleas to hear the OAG’s remaining claims alleging Anadarko allocated markets with Chesapeake to secure natural gas leases instead of competing for leases in violation of Pennsylvania’s Antitrust Common Law.
A: The OAG Settlement only applies to Chesapeake, not other gas companies.
A: The Private Class Settlements announced in 2018 are unrelated to the OAG Settlement. However, you will receive a combined notice of the OAG Settlement and the Class Settlements from the Settlement Administrator. You do not need to participate in the Class Settlements to participate in the OAG Settlement. You will automatically receive the one-time cash payment under the OAG Settlement, but if you want to take advantage of the new payment methodology under the OAG Settlement you have to elect to do so or else you will continued to get paid as you currently are being paid. You will be receiving more information on the election process from the Settlement Administrator. Additionally, information will be posted on the Settlement Administrator’s website at www.paroyaltysettlements.com
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 refusal to accept this deal does not mean that a landowner will be able to continue his or her lawsuit against Chesapeake. The bankruptcy will extinguish that lawsuit.
A: No. The OAG Settlement is completely separate.
A: The individual will be selected by the OAG and Chesapeake.
A: The Ombudsman 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 gas companies should direct them to the OAG.