WHEELING, W.Va. — The U.S. Department of Justice has subpoenaed Chesapeake Energy’s records regarding the company’s royalty payment practices to oil and natural gas mineral owners.
Chesapeake disclosed the DOJ’s investigation last month during a regulatory filing with the Securities and Exchange Commission. In its filing, the company said several states have joined the DOJ with subpoenas over its royalty practices.
Multiple mineral owners who have contracts with Chesapeake – many of them in Pennsylvania – also are filing civil lawsuits against the company for allegedly not receiving their rightful allocation of production royalties, the SEC documents indicate.
“The suits against us allege, among other things, that we used below-market prices, made improper deductions, used improper measurement techniques and/or entered into arrangements with affiliates that resulted in underpayment of royalties in connection with the production and sale of natural gas and” natural gas liquids, the company’s SEC filing states.
Chesapeake would not expand on the information in the quarterly filing.
“We decline to comment beyond the statements made in the filing,” company spokeswoman Lindsay McIntyre said.
According to the SEC filing, Chesapeake has resolved some of the civil lawsuits with negotiated settlements, while the company prevailed in some others. Brooke County leaseholder Scott Sonda continues his lawsuit against the company for improper royalty payments.
“They placed us in a unit – have tried to tender us a payment based on three wells production. It is less than what the payment would be based on the correct payment to us based on the one well under our property, if paid by the correct unitization,” Sonda said.
Chesapeake recently agreed to sell nearly all of its West Virginia assets to Texas-based Southwestern Energy Co. for $5.4 billion, but the company has said it intends to maintain ownership of its Ohio holdings including operations in Belmont, Harrison, Columbiana and Carroll counties.
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