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Sunday, July 6, 2014

Gas lessors beware...companies cheating on leases

"HARRISBURG, Pa. (CN) - Chesapeake Energy Corp. and its subsidiary Access Midstream Partners cheated Pennsylvania landowners of more than $5 billion in gas and oil royalties through inflated and unreasonable fees, a RICO class action claims in Federal Court. Lead plaintiff, the Suessenbach Family Limited Partnership, seeks damages for racketeering, unjust enrichment, mail fraud, wire fraud, honest services fraud, conversion and civil conspiracy. Chesapeake is the nation's second-largest producer of natural gas. The complaint states: "Since at least 2010 Chesapeake engaged in unlawful conduct to improperly extract billions of dollars in royalties owed to plaintiffs and other lessors by artificially manipulating and deducting from royalty payments the cost of 'marketing,' 'gathering,' and 'transporting' natural gas. The marketing, gathering and transportation deductions at issue in this action were both unreasonable and inflated."

     The Suessenbachs claim that "Chesapeake's subsidiaries have paid fees, which are then charged to lessors, for gas pipeline transport to Access Midstream that are many multiples of Access Midstream's actual costs." In one case, the family claims, the markup was more than 3,000 percent. "These deductions were inflated, improper, completely unrelated to the 'cost of services,' did not serve to enhance the marketability of gas, and instead, merely served to enrich the co-conspirators who devised the scheme," the complaint states. It continues: "The benefit to Access Midstream is clear. Access Midstream's predominant source of revenue is gathering fees and Chesapeake accounts for approximately 84 percent of Access Midstream's business.""