You need a computer, newspaper, coffee, bottled water and a good dog

WV — Don’t leap into pooling

EDITORIAL – Morgantown Dominion Post Newspaper, November 21, 2014

As heated issues go, most lie just below the surface — simmering — until they start spewing controversy. No one’s calling a proposal in the state Legislature on pooling mineral tracts to drill horizontal Marcellus wells an eruption, yet. But this issue will explode once the regular legislative session begins in January.

This legislation is only a proposal for now, and many of the lawmakers it was presented to this week during an interim legislative session will no longer be in office in 2015. Yet this bill will undoubtedly be on the front burner in what promises to be a turbulent session.

We’re not going to quibble over whether to call it forced pooling or fair pooling, for now. Obviously, where you stand on that detail depends on where you sit. Energy lobbyists, who had a front row seat while ironing out this bill’s specifics during talks among the state’s two major oil and gas industry groups, have gone so far as to deem this measure “fair to all parties.”

However, we are going to lock horns with this proposal on two substantive issues that bulldoze directly over the rights of mineral owners who refuse to participate in pooling projects.

The bill stipulates that the driller must have agreements with mineral owners who own 67 percent of the project’s acreage before it can apply to the state for a pooling order. That percentage is too low. Especially since it conceivably could allow just one owner of that percentage of a mineral rights tract unit to approve such projects.

It’s also conceivable that drilling projects could take a page out of politics’ playbook and gerrymander or manipulate and design project tracts to give drillers every advantage. We recommend raising that percentage to at least 75 percent for the time being, creating a tougher standard for pooling orders.

The issue of just how much is revealed to reach a market-based value vs. what is just and reasonable is also far from clear. More transparency about what other mineral rights owners are receiving and how those figures are reached is also essential to this process. Why not make the prices paid for all leases of mineral rights pubic information?

A final concern of ours is during interviews with legislative candidates this fall, some did note that the issue of pooling would come up in January. It already has and the energy lobby’s pressure on legislators will be relentless from hereon. Only a few candidates were knowledgeable about pooling, earlier. So we call on every lawmaker to do his or her homework and learn the particulars of this proposal.

But even more crucial is that the public also vent its concerns on this issue.

Expense Deductions Questionable or Illegal?

Around the country, landowners are suing Chesapeake Energy and other drillers for massive deductions from royalty checks

From an Article by Peter Gorman, Fort Worth Weekly, April 16, 2014

Donald Feusner used to be a dairy farmer. His 370 acres of land in northeast Pennsylvania border New York state in a gloriously lush area. In 2011, when his farm was no longer profitable, he sold off his herd and retired to what he thought would be the life of a gentleman farmer, living off the proceeds of the gas wells Chesapeake Energy had drilled on his land. And in December 2012, when the wells came in, it looked as though he’d made a safe bet: Royalty income from the first month’s production alone totaled more than $8,500.

But five months later, with the wells still producing the same amount of gas, his royalty check suddenly shrank by more than 80 percent, to just under $1,700, eaten away by what Chesapeake called “post-production costs.” In the following months, his checks dwindled even further, to almost nothing.

“In October 2013, I got a check that said my royalty was $6,000,” said Feusner, “but after one set of deductions it was reduced to $115; after another adjustment it dropped further. They wound up taking 99.3 percent of my royalty. I got $46.”

Harold Moyer, an accountant with the Pennsylvania Farm Bureau who represents Feusner and 150 other royalty owners in northern Pennsylvania, said that Feusner’s lease agreement was bad from top to bottom: It not only let Chesapeake put a large well pad on the property for no extra money, but it allowed the company to deduct post-production costs.

Those costs covered every aspect of getting the gas from the well to market: separating out water moisture and other gases, compressing it, sending it through gathering lines, even a fee for selling it. And the deductions weren’t made just from Feusner’s checks. Across Pennsylvania tens of thousands of people who leased their mineral rights saw their post-production costs — which are legal under the terms of most leases — jump from pennies on the dollar to most of that dollar in the beginning of 2013.

Jerry Simmons, executive director of the National Association of Royalty Owners, said the situation in Pennsylvania is the worst case of royalty rip-off he’s ever seen. It’s so bad there, he said, that Gov. Tom Corbett recently asked his attorney general to start an investigation.

Rules vary from state to state on post-production costs and other methods that drillers use to reduce the amount of royalties they pay. But one version or another of the problem seems to be happening all over the country, from shale drilling plays in Ohio to South Texas to the Rockies.

The worst offender is Chesapeake Energy, by several accounts. “There is no question that Chesapeake is the bad actor all over the country, and its actions are being imitated,” said Jackie Root, president of the Pennsylvania NARO chapter. “They’re taking deductions from leases that have ‘no deduction’ clauses, and then they sometimes take deductions that are not legal at all.”

NOTE: The original article is quite long and detailed.  Please read this printed Article in the Fort Worth Weekly.

Chesapeake Energy Offers Buyouts

Primary Article by Anya Litvak, Reporter for the Pittsburgh Business Times, December 14th

Chesapeake Energy, the largest lease holder in the Marcellus Shale region, is asking 275 of its employees to voluntarily leave the company.

The voluntary separation program is “part of the company’s ongoing efforts to improve efficiencies and reduce costs,” a company statement announced.

Chesapeake employees have 45 days to mull it over, and those who take the offer will leave beginning in February.

Earlier this week, the Chesapeake Energy announced it was selling its Marcellus and Utica midstream assets for $2.16 billion, along with infrastructure in several other shale plays in an effort to better its financial position.  This sale is to a corporate entity known as ACCESS.

This article is also accessible at Businessweek, which can be seen at this web-site.