Chesapeake Leases Voided: Middlebourne Couple Out $100,000

Wheeling Intelligencer
31 October 2010
By Casey Junkins, Staff Writer

MIDDLEBOURNE - With the $100,000 lease payment they expected to receive from Chesapeake Energy, Paul and Martha Keller planned to perform some home improvements and buy a new truck.

The Kellers will not be receiving the money, however, as Chesapeake - the same company that has signed up property owners for natural gas drilling leases throughout Tyler, Wetzel, Marshall and Ohio counties, including The Highlands and Oglebay Park - has returned their lease without payment.

Based on the contract they signed June 2, the Kellers were to receive at total of $100,000, based on $1,000 per acre for their 100 acres of land at their farm, near Middlebourne. Many landowners throughout West Virginia's Northern Panhandle have signed leases to receive payments of anywhere from $5 to $4,000 per acre.

Ken Barton, a "land man" for Continental Land Resources LLC, whose company was contracted by Chesapeake to collect leases in Tyler County, got the Kellers to sign on with the Oklahoma City-based gas driller.

"If he told me one time, he told me a thousand times - the money is coming," Paul Keller said of Barton.

Barton did not stop with having the Kellers sign the actual lease form either. In fact, another form signed by Barton and the Kellers reads at the top, "Chesapeake Appalachia LLC (a subsidiary of Chesapeake Energy): Order of Payment." The form states that the Kellers will receive $99,990, the total after an initial $10 payment Chesapeake did give them.

Barton even had the Kellers sign a W-9 Internal Revenue Service tax form, further convincing them they would, in fact, be getting paid.

"If it sounds too good to be true, it is too good to be true," Martha Keller reflected in disappointment.

Paul Keller said he heard that as many as 206 Tyler County property owners got their leases back without payment. Barton could not confirm this number, but said, "Maybe 20 families I dealt with are not going to get paid."

"It is disappointing for everyone, but the energy business is volatile," Barton noted. "Unfortunately, until they put a well in the ground, it is basically all speculative."

The Sept. 15 letter Barton sent the Kellers regarding the voided lease reads, "While we hope that this is a temporary situation and that Chesapeake will continue exploration in Tyler County, W.Va., at this time, you are free to lease with another company. You are under no obligation for any initial money that was paid in consideration of any leases."

As for reasons why the leases were not going to be honored, Barton said, "We were told that Chesapeake was focusing on another area of the county."

In a statement provided by Chesapeake Director of Corporate Development Stacey Brodak, company officials note, "There are many reasons that a lease could be returned to a landowner."

"Those reasons could include title irregularities, lack of Chesapeake Management approval, and most often, changes of priority or focus of future development plans. This situation could occur anywhere where leasing is occurring - Tyler County is not an exception," the statement concluded.

Last year, the Wheeling Park Commission got Chesapeake to pay $750 per acre for drilling at Oglebay and Wheeling Parks. Earlier this year, the commission and city of Wheeling each received $386,629 in lease revenue. Chesapeake also paid the park commission an additional $100,133 to lease property at Wheeling Park.

Ohio County commissioners this year signed on with Chesapeake for $3,600 per acre, landing them $7.85 million for 2,180 acres.

Currently, more than 100 northern West Virginia property owners are suing Range Resources Corp. in federal court because they claim the driller did not pay them the amount they were owed for gas leases signed in 2008. Paul Keller is not yet sure if he or other Tyler County landowners will pursue a legal claim against Chesapeake.

A clause in the Kellers signed Order of Payment would seem to make it difficult to sue Chesapeake for the non-payment, as it reads, "Chesapeake retains the right to surrender the lease associated with the Order of Payment at any time for any reason."

Still, the Kellers mainly want other property owners to learn from their experiences.

"I just don't feel that it's right for an out-of-state company to come in here and do something like this to these families," Paul Keller said. "A lot of these people went out and bought farm equipment and stuff, and now they're not going to get the money."

"The public definitely needs to know about this," Martha Keller added.