Chesapeake Energy was back in the national news again recently.
ProPublica, an independent investigative media site based in New York, published a report a couple of weeks ago on how oil and gas companies are cutting royalty payments to landowners through questionable practices.
The report leads with the case of northern Pennsylvania farmer Don Feusner, who has wells on his land drilled by Chesapeake, the Oklahoma City energy company formerly led by Aubrey McClendon. According to the report, Chesapeake starting “withholding almost 90 percent of Feusner’s share of the income to cover unspecified ‘gathering’ expenses and it wasn’t explaining why.”
This is not uncommon, the report concludes, but it does raise contractual and royalty issues. Here are the overview paragraphs of the report:
. . . manipulation of costs and other data by oil companies is keeping billions of dollars in royalties out of the hands of private and government landholders, an investigation by ProPublica has found.
An analysis of lease agreements, government documents and thousands of pages of court records shows that such underpayments are widespread. Thousands of landowners like Feusner are receiving far less than they expected based on the sales value of gas or oil produced on their property. In some cases, they are being paid virtually nothing at all.
The accelerated use of hydraulic fracturing, known as “fracking,” has created a mini-boom in gas wells in different parts of the country, such as Pennsylvania and North Dakota, but landowners are not necessarily reaping the benefits they expected from the bonanza, the report argues. Many people have also argued fracking has a detrimental impact on the environment.
Chesapeake declined to talk to ProPublica for the report. The company made major headlines in recent months when McClendon’s leadership of the company came under fire. Reuters produced a special report on how McClendon, then the company’s chief executive officer, merged his personal finances with company business. McClendon has since left the company.
I couldn’t find any significant local coverage of the ProPublica piece, which isn’t surprising. The initial piece was published Aug. 13. This excellent, investigative reporting directly involving a local company was probably either completely ignored or at least played down here. I was made aware of it when it was republished on philly.com. The corporate media here continues to coddle local energy companies while outside media outlets fill the void. It should be noted that The Oklahoman, the state’s largest newspaper, is now owned by a Colorado billionaire, who made his fortune in the oil industry.
The state’s private energy sector, which includes companies such as Chesapeake, SandRidge Energy, Devon Energy and Continental Resources, deserves more local media scrutiny of its business practices and its local and national environmental impact. While these companies are important to the local economy, they also need to act responsibly.
In his piece, ProPublica writer Abrahm Lustgarten noted:
ProPublica made several attempts to contact Chesapeake Energy for this article. The company declined, via email, to answer any questions regarding royalties, and then did not respond to detailed sets of questions submitted afterward. The leading industry trade group, the American Petroleum Institute, also declined to comment on landowners’ allegations of underpayments, saying that individual companies would need to respond to specific claims.
Why won’t Chesapeake and the American Petroleum Institute discuss the issue? That, in itself, raises even more questions.