Chesapeake Leases Voided: Middlebourne Couple Out $100,000
Wheeling Intelligencer
31 October 2010
By Casey Junkins, Staff Writer
MIDDLEBOURNE - With the $100,000 lease payment they expected to receive
from Chesapeake Energy, Paul and Martha Keller planned to perform some
home improvements and buy a new truck.
The Kellers will not be receiving the money, however, as Chesapeake -
the same company that has signed up property owners for natural gas
drilling leases throughout Tyler, Wetzel, Marshall and Ohio counties,
including The Highlands and Oglebay Park - has returned their lease
without payment.
Based on the contract they signed June 2, the Kellers were to receive
at total of $100,000, based on $1,000 per acre for their 100 acres of
land at their farm, near Middlebourne. Many landowners throughout West
Virginia's Northern Panhandle have signed leases to receive payments of
anywhere from $5 to $4,000 per acre.
Ken Barton, a "land man" for Continental Land Resources LLC, whose
company was contracted by Chesapeake to collect leases in Tyler County,
got the Kellers to sign on with the Oklahoma City-based gas driller.
"If he told me one time, he told me a thousand times - the money is
coming," Paul Keller said of Barton.
Barton did not stop with having the Kellers sign the actual lease form
either. In fact, another form signed by Barton and the Kellers reads at
the top, "Chesapeake Appalachia LLC (a subsidiary of Chesapeake
Energy): Order of Payment." The form states that the Kellers will
receive $99,990, the total after an initial $10 payment Chesapeake did
give them.
Barton even had the Kellers sign a W-9 Internal Revenue Service tax
form, further convincing them they would, in fact, be getting paid.
"If it sounds too good to be true, it is too good to be true," Martha
Keller reflected in disappointment.
Paul Keller said he heard that as many as 206 Tyler County property
owners got their leases back without payment. Barton could not confirm
this number, but said, "Maybe 20 families I dealt with are not going to
get paid."
"It is disappointing for everyone, but the energy business is
volatile," Barton noted. "Unfortunately, until they put a well in the
ground, it is basically all speculative."
The Sept. 15 letter Barton sent the Kellers regarding the voided lease
reads, "While we hope that this is a temporary situation and that
Chesapeake will continue exploration in Tyler County, W.Va., at this
time, you are free to lease with another company. You are under no
obligation for any initial money that was paid in consideration of any
leases."
As for reasons why the leases were not going to be honored, Barton
said, "We were told that Chesapeake was focusing on another area of the
county."
In a statement provided by Chesapeake Director of Corporate Development
Stacey Brodak, company officials note, "There are many reasons that a
lease could be returned to a landowner."
"Those reasons could include title irregularities, lack of Chesapeake
Management approval, and most often, changes of priority or focus of
future development plans. This situation could occur anywhere where
leasing is occurring - Tyler County is not an exception," the statement
concluded.
Last year, the Wheeling Park Commission got Chesapeake to pay $750 per
acre for drilling at Oglebay and Wheeling Parks. Earlier this year, the
commission and city of Wheeling each received $386,629 in lease
revenue. Chesapeake also paid the park commission an additional
$100,133 to lease property at Wheeling Park.
Ohio County commissioners this year signed on with Chesapeake for
$3,600 per acre, landing them $7.85 million for 2,180 acres.
Currently, more than 100 northern West Virginia property owners are
suing Range Resources Corp. in federal court because they claim the
driller did not pay them the amount they were owed for gas leases
signed in 2008. Paul Keller is not yet sure if he or other Tyler County
landowners will pursue a legal claim against Chesapeake.
A clause in the Kellers signed Order of Payment would seem to make it
difficult to sue Chesapeake for the non-payment, as it reads,
"Chesapeake retains the right to surrender the lease associated with
the Order of Payment at any time for any reason."
Still, the Kellers mainly want other property owners to learn from
their experiences.
"I just don't feel that it's right for an out-of-state company to come
in here and do something like this to these families," Paul Keller
said. "A lot of these people went out and bought farm equipment and
stuff, and now they're not going to get the money."
"The public definitely needs to know about this," Martha Keller added.