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Chesapeake could deduct impact fees

on October 17, 2013 10:40 AM

PITTSBURGH (AP) — Chesapeake Energy has included language in contracts that says it could deduct a portion of Pennsylvania’s impact fee from some lease royalty payments, even though that’s expressly forbidden under state law, landowners and attorneys said.

But a Chesapeake spokes- man said the company hasn’t deducted the fees from Pennsylvania royalty owners.

Some landowners have unknowingly agreed to such language in recent contracts, the Pittsburgh Post-Gazette reported.

Lorraine Seiber, a church elder of First United Presbyterian Church of Darlington, said she didn’t know the impact fee deduction was part of a recent Chesapeake lease that bears her signature. The church is about 40 miles north of Pittsburgh.

The newspaper said it was unclear if Chesapeake has actually deducted the fees from any royalty payments. Chesapeake spokesman Gordon Pennoyer said the company hadn’t done so and believes it is in full compliance with state law.

Patrick Creighton, a spokesman for the industry group the Marcellus Shale Coalition, wrote in an email that “while some leases may contain this language, we are not aware of a single instance whereby a landowner has had these fees deducted from their royalty payments.” Creighton said state law takes precedence over lease terms.

Other landowners have agreed to the language, according to a sample of contracts accessed at MarcellusUSA.com, a warehouse of scanned oil and gas leases in Pennsylvania and Ohio.

Jackie Root, president of the Pennsylvania chapter of the National Royalty Owners Association, said there’s “no question” that royalty owners shouldn’t be paying a portion of the impact fee, which was part of the major update to state oil and gas laws passed last year.

The law says that if such a provision is included in a lease that part of the document “shall be null and void.” That’s true for leases signed before and after the law took effect.

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