Chesapeake Energy Faces New York Lawsuit Over Marcellus Shale Leases

Chesapeake Energy has again been named in lawsuits stemming from its Marcellus Shale natural gas drilling concerns. This time, hundreds of property owners in New York’s Southern Tier are challenging drilling leases Chesapeake purports to hold on their land.

The Marcellus Shale is a black shale formation extending deep underground from Ohio and West Virginia northeast into Pennsylvania and southern New York. Geologists estimate that the entire Marcellus Shale formation contains between 168 trillion to 516 trillion cubic feet of natural gas throughout its entire extent. Over the past several years, several states in the Marcellus Shale have experienced a natural gas drilling boom, as energy companies have set up hydraulic fracturing operations to tap this resource. Hydraulic fracturing, or fracking, involves injecting a cocktail of water sand and chemicals into the ground at high pressure to shake lose natural gas deposits locked in shale formations.

While energy companies have been eager to tap the Marcellus Shale in New York, horizontal hydraulic fracturing has been put on hold there until at least July, while its environmental impacts are assessed.

According to pressconnects.com, Chesapeake Energy is one of several energy companies that have sent letters to landowners in the New York Southern Tier with whom it has leases asserting that the state’s fracking moratorium constitutes a “force majeure” — or an unforeseen event that hinders the terms of the contract — and that the leases are being extended. Some of those property owners expected their leases to run out this year. Now, approximately 300 have joined two class action lawsuits Chesapeake’s force majeure claims.

“All of the landowners in this action completely disagree that the leases should be extended. They made a bargain, and they expect Chesapeake to hold up to the bargain,” an attorney representing 160 such plaintiffs – mostly property owners in Broome and Tioga counties – in one of the lawsuits, told pressconnects.com.

The lawsuit claims Chesapeake “engaged in misleading and deceptive practices directed at hundreds, if not thousands, of persons owning real property in New York state” by sending letters to landowners notifying them that their leases have been extended.

The lawsuit further asserts the state’s drilling moratorium, which started in 2008, does not constitute a “force majeure” because the moratorium did not ban all drilling. According to pressconnects.com, the moratorium did not ban drilling in New York’s other shale formations, and energy companies are permitted to drill vertically and can fracture wells using less than 8,000 gallons of water.

A similar lawsuit involves 146 plaintiffs, and includes property owners in Tioga, Broome, Cortland and Chemung counties.

Many of the leases at issue were signed for $3 an acre up to 10 years ago, pressconnects.com said. Most were signed by smaller companies and sold to Chesapeake, which in 2008 sold 32 percent of its Southern Tier leasehold to Norway-based Statoilhydro, pressconnects.com said.