AP NEWS

AG’s Office Can Proceed With Lawsuit Against Gas Drillers

March 25, 2019

The state Attorney General’s office can proceed with a lawsuit filed on behalf of landowners it alleges were cheated out of royalties by two natural gras drillers, a state appeals court ruled. In a 6-1 ruling, the state Commonwealth Court upheld a judge’s ruling that denied motions filed by Chesapeake Energy Inc. and Anadarko Petroleum Corp. that sought to dismiss the case. The court did dismiss one of two counts that sought damages for violations of antitrust laws. The lawsuit, filed in Bradford County Court in 2015, alleges Chesapeake and Anadarko violated Pennsylvania’s Unfair Trade Practices and Consumer Protection Law by engaging in various unlawful conduct, including misrepresenting how much money landowners would receive for allowing the companies to extract natural gas beneath their properties through Marcellus Shale drilling. The suit also alleges the companies violated antitrust laws by agreeing not to compete against each other, which reduced competition and allowed them to keep royalty payments artificially low. The attorney general’s office was prompted to act after receiving complaints from landowners who say the companies improperly deducted post-production costs from their royalty checks. The fees were so high that landowners sometimes received nothing. Attorneys for Chesapeake and Anadarko argued the unfair trade practices claim should be dismissed because the law protects only consumers who purchase goods. The landowners in essence sell the natural gas extracted from their properties to the companies, therefore the law does not apply to firms, they said. Bradford County Senior Judge Kenneth D. Brown rejected the claims in 2017, finding that the law protects any type of trade or commerce, not just the purchase of goods. The majority of the Commonwealth Court affirmed the ruling, finding that lease agreements fall under the trade and commerce protections of the unfair trade practices law. In a dissenting opinion, Judge Anne E. Covey said the majority’s ruling misconstrues the definition of trade and commerce in a manner that’s inconsistent with the legislature’s intent, which is to protect consumers. “The majority holds that ... a consumer protection statute intended to bolster consumers’ bargaining powers, can authorize legal action against a purchaser,” Covey said. The majority opinion does overturn a portion of Brown’s ruling regarding the antitrust allegations. It dismissed one count that alleged the companies engaged in “market sharing agreements” to reduce competition, finding that type of activity is not covered under existing law. It let stand a claim the companies violated antitrust laws by engaging in unfair or deceptive practices, however. Gordon Pennoyer, spokesman for Chesapeake, said it intends to ask the state Supreme Court to hear an appeal of the ruling. Pennoyer noted Chesapeake has reached settlements resolving the “vast majority” of lawsuits landowners filed against it regarding royalty disputes. The attorney general’s case has interfered with those settlements, he said. “Chesapeake will continue to pursue resolution of this matter with the attorney general so that our royalty owners can enjoy the benefits of those settlements and choose their royalty formula going forward,” he said in an email. Attempts to reach John Christiansen, spokesman for Anadarko, were unsuccessful. Contact the writer: tbesecker@timesshamrock.com; 570-348-9137 @tmbeseckerTT