Driller Accused of Illegal Actions: Former U.S. Attorney Sues Chesapeake

Wheeling WV  Intelligencer
20 February 2011
By Casey Junkins, Staff Writer

WHEELING - Ohio County resident Melvin Kahle is suing Chesapeake Energy because he believes the company's plan to drill a natural gas well on his farm near Triadelphia is illegal.

Chesapeake Energy has received a valid permit from the West Virginia Department of Environmental Protection to drill a well on Kahle's 180 acres along Chapel Hill Road. Kahle said he has never signed a lease of any type with Chesapeake, noting he previously had a mineral rights agreement with Range Resources. Kahle said Range terminated his lease last August.

"We have never entered any agreement with Chesapeake," said Kahle, a former Ohio County prosecuting attorney and former U.S. Attorney for the Northern District of West Virginia from 2000-2001.

Kahle last month filed suit against Chesapeake in Ohio County Circuit Court to prevent them from drilling on his land because he maintains they have no right to do so.

Despite Kahle's contention that he has no drilling deal with Chesapeake, the West Virginia Department of Environmental Protection gave Chesapeake permission to drill a well on Kahle's 180 acres of property along Chapel Hill Road.

"If issues exist between an operator and a mineral owner regarding the lease, then such a dispute is a private matter between the two parties," said DEP spokeswoman Kathy Cosco.

Neither Chesapeake nor Range would comment on Kahle's lawsuit.

Kahle's Position

Documents obtained by the Sunday News-Register show that Kahle entered into an oil and gas lease agreement on May 15, 2006, with a firm then known as "Great Lakes Energy Partners." This company later became known as Range Resources Appalachia, which is a division of Fort Worth, Texas-based Range Resources Corp.

The terms of this contract called for Kahle to receive an annual lease payment of $8.75 per acre, with 14 percent on production royalties for any gas taken from his land. These numbers fall far short of the $3,000-$5,000 per acre - and 18-20 percent of production royalties - drillers such as Chesapeake have recently agreed to pay for mineral rights throughout the area.

Kahle said that after a few years of inactivity by Range, he received a letter from that company dated Aug. 20, 2010. This letter read in part, "The purpose of this letter is to advise you that we are not accepting any new leases in your area at this time and are consequently returning your lease to you. This letter also confirms that there are no contractual or legal obligations between Range ... on the one hand, and you on the other hand, and you may pursue other lease offers with other gas producers as you please."

Then, without notice, Kahle said subcontractors hired by Chesapeake arrived at his land on Oct. 18 to conduct pre-drilling surveys. When Kahle asked the workers what they were doing, he said they informed him that Chesapeake and Range had agreed to "swap" some leases, giving Chesapeake the right to drill on his land.

A document on file in the Ohio County Clerk's office shows that Range assigned Kahle's lease to Chesapeake by an agreement made between the companies on Aug. 16. However, the document also reads that it is retroactively "dated effective as of July 1, 2010."

"Chesapeake and Range say they agreed to swap leases on July 1. Why didn't the people from Range tell me, 'This is not our lease anymore,'" Kahle said regarding his Aug. 20 letter from Range. "Why did they tell me I was free to pursue other offers?"

In his complaint, Kahle maintains that Range did not have the authority to assign or sell his lease to another company. He also alleges that Chesapeake did not acquire an existing lease for his property because he believes Range surrendered the lease with the Aug. 20 letter.

Kahle is joined by his wife, Carol Kahle, as plaintiffs in the litigation. The Kahles are requesting that the lease be declared null and void, while also requesting to recover their legal fees. A statement in the complaint notes the Kahles will not accept an amount in excess of $75,000.

Chesapeake and Range Chesapeake spokeswoman Jacque Bland said the company would have no comment on the pending litigation. Range spokesman Matt Pitzarella also said his company had no comment on the matter.

Kahle is represented in the lawsuit by James Companion and Frank Duff, his fellow attorneys from Wheeling-based Schrader Byrd & Companion. Chesapeake is represented by Kevin Abbott and Nicolle Bagnell of Pittsburgh-based Reed Smith.

According to the Reed Smith website, Abbott "has more than 25 years of experience in representing clients in the oil and gas industry, natural gas exploration and production companies ..." The law firm notes that Bagnell "represents energy clients in various matters, including natural gas condemnations, encroachment cases, and various contract disputes."

Abbott and Bagnell recently filed a motion to move the case from Ohio County Circuit Court to federal court, specifically requesting the matter be decided in the Wheeling Division of the Northern District of West Virginia. Both attorneys did not respond to requests for comment.

DEP's Response

Chesapeake filed for permission in December from the DEP's Office of Oil and Gas to drill a well on Kahle's property. Kahle then filed comments to the office regarding the permits, which are recorded on the DEP's website as "surface owner comment received."

However, on Feb. 11, the DEP gave Chesapeake permission to place a gas well on Kahle's land, while noting "surface objection resolved."

"I have not resolved anything with them," Kahle said upon learning the DEP had issued the permit.

In response to Kahle, Cosco said, "Surface owners have the right to comment on a permit, but not a right to object."

"Those comments that were specifically related to the permit were addressed by the company to the satisfaction of the Office of Oil and Gas, and therefore the permit was issued," Cosco added. "A drilling permit does not create, convey, or affirm mineral property rights - that is accomplished through a lease or deed."