AG’s Natural Gas Leasing and Royalty Case Receives Knockout Punch from PA Supreme Court

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With the oil and gas industry taking hits from all directions, the tides saw a recent change when the Pennsylvania Supreme Court delivered its ruling in favor of two natural-gas drilling entities. Combating the Attorney General’s office, the state’s high court determined that the office had no right to challenge leasing rights and mineral activities.

Case History

Citing violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law (UTPCPL), Attorney General Josh Shapiro filed a lawsuit in 2015. The not-so-lucky recipients included Anadarko Petroleum Corporation and Chesapeake Energy Corporation.

“Chesapeake and Anadarko will pay,” said Shapiro in a post on his website a year ago. He additionally proclaimed that he would work to ensure landowners were awarded what was owed to them.

According to Shapiro, Chesapeake and Anadarko displayed unethical and illegal business practices at various points of operation. Highlighted among them, the oil and gas companies employed fraudulent and predacious methods while working with northern Pennsylvania landowners to establish leasing and royalty deals. With accusations of collusion made, the companies were speculated to have split business areas up in a mutually beneficial strategy.

While the lower courts supported the notion presented by Shapiro, he argued that the companies’ actions violated the UTPCPL. This, therefore, provided landowners the ability to bring suit against both Anadarko and Chesapeake. Responding in opposition, the companies stipulated that in this particular deal, they were the buyers while the landowners were labeled the sellers. With this being the scenario, the case was unsubstantiated because Anadarko and Chesapeake were actually purchasing the lease and royalty rights from the landowners.

The Reversal

In a 6 to 1 decision, Pennsylvania’s Supreme Court agreed with Chesapeake and Anadarko and overturned the decision of the lower court. The ruling, however, comes a little late as the AG’s office reached a settlement with Chesapeake regarding its bankruptcy directive to pay the sum of $5.3 million to landowners. As a result, Anadarko is solely affected by the decision. 

Although advancement of consumer protection laws is not a method of reach, Pennsylvania continues to forge ahead with an antitrust claim. In this particular decree, both Chesapeake and Anadarko allegedly positioned specific parcels of land for lease acquisition resulting in lower bonus type payments.

According to the Attorney General’s office, despite the Supreme Court decision, it will continue to battle in favor of its antitrust claim. Looking to the future, the office said it would be chartering state legislators to develop provisions to ensure the protection of landowners in future dealings of this kind.

 

Nick Vaccaro is a freelance writer and photographer. Besides providing technical writing services, he is an HSE consultant in the oil and gas industry with eight years of experience. He also contributes to Louisiana Sportsman Magazine and follows and photographs American Kennel Club field and herding trials. Nick has a BA in Photojournalism from Loyola University and resides in the New Orleans area. 210-240-7188 [email protected]

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