Leases Taken Over: Chesapeake New Owner Of Range Contracts

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

WHEELING - Those who once signed gas drilling deals with Great Lakes Energy or Range Resources for land in Ohio County may now find that Chesapeake Energy controls their leases - and plans to drill on their land.

As Melvin Kahle continues his lawsuit against Chesapeake for preparing to drill on his property, it is now clear that Kahle is not the only Ohio County landowner to see their Range lease "looped," "flipped" or "assigned" to Chesapeake without their knowledge or permission.

In fact, the contract signed by Kahle - a former U.S. attorney for the Northern District of West Virginia - is but one of at least 156 throughout Ohio County that Range apparently traded to Chesapeake last year, as revealed by a search of records in the County Clerk's Office.

"This is crooked work. No one knew five years ago that this gas would amount to anything like this," said West Liberty business owner Dale Sampson, who is one of the property owners to recently learn of the land swap deal.

When Sampson inked a deal with a firm then formally known as "Great Lakes Energy Partners" - which later became known as Range Resources Appalachia - in 2005, he believed the $8.75 per acre he would receive to lease his 200 acres on an annual basis would be a good way to help pay some property taxes.

Then, if his land ever yielded gas, he would gain 14 percent of production royalties.

These numbers, of course, 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 property throughout the area.

"It's unbelievable," added Sampson. "Back then, if someone would have offered us $100 for an acre, we wouldn't have believed it."

Story of the Looping

Documents on file in the clerk's office show that Range assigned the 156 leases to Chesapeake through an agreement made between the companies on Aug. 16. The documents state that they are retroactively "dated effective as of July 1, 2010," even though the agreement was not made until Aug. 16.

However, these documents were not recorded in the clerk's office until Nov. 8-10.

Kahle said he received a letter from Range dated Aug. 20 that he believes released him from his contract with that company, so he believes the lease Chesapeake has for his property is invalid. The matter is working its way through Ohio County Circuit Court, though attorneys for Chesapeake have requested the matter be moved to federal court.

After believing that they would be free to seek new leases worth thousands of dollars per acre with firms like Chesapeake, Kahle and Sampson now seem to be stuck with their $8.75 per acre leases.

Records show that Wheeling businessman Lee Paull III also had his Range lease assigned to Chesapeake. Paull III did not immediately recall if he had been notified of the change.

Tim Greene, owner of Land and Mineral Management of Appalachia, said this is a fairly common practice among drilling companies.

"This is what they do," Greene said, noting he believed Chesapeake's Didriksen well on Dement Road was built on property it acquired from Range.

"They had to get that started before the lease ran out," Greene said. "The gas companies act like they are in their own little world. They forget that other people are involved."

Greene said the best way to avoid having this happen is to include a specific clause in your lease that notes that the company cannot trade or sell your lease to another company without seeking your input.

Matt Pitzarella, director of public affairs for Range Resources, said there are cases in which Range has "exchanged" leases with Chesapeake or other companies.

"Typically, landowners are notified, but I don't believe this is required," he said.

Jacque Bland, media relations specialist for Chesapeake, said the company would have no comment on the lease looping.

Those Who Have Been Looped

In addition to Kahle, Sampson and Paull III, these Ohio County lease mineral owners who were previously under contract with Range are now under contract with Chesapeake, according to documents in the County Clerk's Office. Some may be listed multiple times, signifying multiple lease contracts: Rex Strawn, Michael Breitinger, Ebbie Joseph, Michael O'Hara, Harold Strawn, Michael McDonald, Lewis Hopkins, Scott Sonda, James Criswell, Mary Cliser, Paul Scott, Michael Martin, William Rodgers, Joseph Taggart, John Hickman, Robert Duvall, Joseph Ennis, Robert Glauser, Roy Riggle, Dorothy Frye, Ernest Culley Jr., Paul Baker, Guy Whiteman, Roy Ferrell, Robert Hoffman, John Davis, Kenneth Craig, Donnie Horr, John Cox, James Dailer, Gerold Berghoff, William Rodgers, Wilbur White, Jerry Harris, Donald Waddell, Janet Honecker, Robert Minch Jr., Walter Knollinger, Joseph Taggart, Clarence Farmer, Robert Davis, William Fluty, Lloyd Behrens Jr., Howard Minch, Thomas Davis, John Davis Jr., Joseph Davis, Howard Minch, Rodney McConnell, William Childers, John Metz, Edward Nichols, Susan Sands, Daniel Henry, Robert Fish, Cecil Hickman, Mitchell Holmes, Sylvia Billick, Daniel Vargo, William Rodgers, Rome Brown, James Richey, Timothy Hays, Jonathan Mitchell, Basil Ellis, John Cox, Robert Saffle, David Danhart, Donald Waddell, George Grove Jr., Atkison Family, Cottage Family, Daniel Tustin, Scott Medlen, Russell Porter, Dolores Ambrister, Herbert Minch, Richard Kelly, Timothy Elliott, Pearl Lough, Marc Seamon, Richard Lough, Jack Walters, David Waddell, Edward Link, Michael Fisher, Tim McNinch, Louis Jack, Dale Richea, Lisa Hrutkay, Fred Foster, Michael Wilhelm, Thomas Stenger, Douglas McKay, Groux Dairy Farms, Holland Park, George Couch, Pearl Lough, Vaughn Stricklin, Sarah Porter, Barbara LeMasters, Scott Knollinger, Ralph Krasevec, David Main, Clark McKee, James Creighton, Frances Braden, Lucas Oliver, Baird Kloss, Edward Stupak, Bertha Klages, Mark Mikesinovich, William Rodgers, Albert Postlewait, Harold Strawn, John Cox, Edward Dremak, Chad Glauser, Robert Glauser, Kenneth Cooper, Michael Pritt, Richard Link, Leslie Reedy, James Kerekes, Robert Gear, Richard Cowan, Charles Boone, Roger Clutter, Bertie Orum, Bernard Raab, Harold Orum, John Orum, Kevin Kimmins, Wildlife League of Ohio County, Herbert Sharp, John Tominack Jr., Herbert Minch, Robert Minch Jr., R. Richard Bloomfield, Eric Pattison, Karl Binder, Paul Knollinger, Richard Hohman Jr., James Loew, Elizabeth Hestick, Howard Winters, Charles Kellam, Michael Vargo and Arthur Stricklin.