Bradford County commissioners criticize $7.5M settlement with Chesapeake
TOWANDA - At their meeting on Thursday, the Bradford County commissioners criticized the proposed $7.5 million settlement of a class action lawsuit against Chesapeake Appalachia LLC, saying it does not go far enough to address the problem of large deductions being taken out of local landowners' royalty checks for post-production costs.
If the settlement is approved by a federal judge, those landowners who would benefit from the settlement will have "a little bit less" taken out of their royalty checks for post-production costs, Bradford County Commissioner Daryl Miller said.
But much more needs to be done to address the issue of excessive post-production deductions, the commissioners said. One big problem that remains is that deductions for post-production costs can reduce landowners' royalty payments far below the state's 12 1/2 percent guaranteed minimum royalty, Miller said.
The commissioners said they will continue to fight for a solution for the problem.
"We're not going to go away from this issue," said Doug McLinko, chairman of the Bradford County commissioners. "There has never been an issue in my adult life that has affected so many property owners and taxpayers and working people and retired people as this issue," he said, adding that the Marcellus Shale lies below a vast part of Pennsylvania.
"I still have full faith in our plan" to address the issue of excessive post-production costs, which is a "fix" by the Legislature, McLinko said.
And it is wrong to ask landowners to spend money on lawyers to address the issue, McLinko said, adding that a lot of lawyers will ask for a percentage of landowners' future royalties as a payment.
According to the lawsuit, Chesapeake deducted post-production fees from royalties paid the leaseholders, despite terms in the leases that preclude them from doing so. The suit further alleged the fees that were charged were in excess of the actual and reasonable costs the company incurred, and that the firm improperly based royalties on the market value of the gas before it had been refined, which was lower than the value once it was in marketable condition.
The proposed settlement would benefit several thousand leaseholders.
The "biggest slap in the face" related to the lawsuit was when Gov. Tom Corbett on Wednesday "came out in support of the settlement, basically portraying it as somehow a fix-all to the problem. It is certainly not that," said Bradford County Commissioner Mark Smith, a Democrat.
And Corbett, a Republican, should be concerned that the deductions are reducing the tax revenue that is coming to the state, Smith said.
Corbett had issued a press release on Wednesday stating that he is "pleased" with the proposed settlement to the class action lawsuit.
"While I understand that serious issues still remain concerning other landowners affected by royalty payment deductions, the proposed settlement is a significant step forward in protecting the interests of Pennsylvania's landowners," Corbett said, as quoted in his press release.
Chesapeake spokesman Jim Gipson has said his company is pleased to have reached a "fair and reasonable agreement (settlement)."
Some gas companies deduct certain post-production expenses from landowners' royalty checks, including the costs of transporting gas to market, and compressing and dehydrating the gas.
James Loewenstein can be reached at (570) 265-1633; or email: email@example.com.