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New Round of Landowners File Suit Against Chesapeake
YOUNGSTOWN, Ohio – Thirty-three landowners in Columbiana County filed a lawsuit late Monday against Chesapeake Exploration LLC, asking a common pleas court there to the declare null and void the oil and gas leases they now hold with the company.
"We're rather ticked off, to put it mildly," says Cynthia Koonce, a plaintiff in the case. "It's like these guys have divided the world amongst themselves."
Koonce, who lives on Guilford Lake in Lisbon and owns 230 acres, signed an oil and gas lease with Denver-based Anschutz Exploration Corp. in 2008. She and the others say the company misrepresented material facts about the energy industry's interest in the area and concealed information regarding the Utica and Marcellus shale, a vast repository of dry and wet gas trapped in shale rock deep beneath eastern Ohio and western Pennsylvania.
According to the complaint, Anschutz scooped up thousands of acres in the region between 2008 and 2010 at a time when few residents of Columbiana County understood the significance of the Utica shale. As such, Anschutz was able to secure these leases at prices well below today's market value, court documents say. Once Anschutz acquired the leases, the company sold them to Chesapeake, court papers say.
"Chesapeake and their assignors knowingly and/or recklessly engaged in a course of conduct in which substantial oil and gas acreage was acquired via land agents who concealed, failed to disclose and/or actively misrepresented material facts in order to persuade landowners to execute leases for as little money as possible," the complaint alleges.
That left landowners with leases in which they received less than 1% of the fair market value for up-front signing bonuses that are now being paid in Columbiana County, court documents say.
"Landowners would not have entered into the Anschutz leases had they received truthful and accurate information as to these material facts," the complaint reads.
Today, leases average between $5,500 and $6,000 per acre in up-front bonus payments, while landowners have negotiated 20% royalties in gross well production.
Also, these landowners argue that the agreements contain a provision that allowed them to seek third party offers or renegotiate before any drilling began, documents say. However, the complaint alleges that Chesapeake has refused to honor that provision, and the plaintiff's attorneys argue that this presents sufficient cause to terminate the lease agreements.
According to court documents, the landowners have received a third party offer to lease their land.
Lee Plakas, an attorney with the Canton firm Tzangas Plakas Mannos & Raies Ltd., and who represents the landowners, says the lease provision protects the landowners' right to receive fair value for their land in the event that the oil company attempted to hold the land without drilling.
Plakas said in a statement that "landowners have a right to receive fair value for their land and to have it put to productive use within a reasonable period of time."
And, the lawsuit claims that the leases were improperly notarized and recorded, and therefore should be negated, court papers say. Moreover, the complaint contends that landowners were not given proper 30-day notification in the case their lease was assigned to another party, thus rendering the agreement null and void.
Gary Corroto, attorney for the landholders, added that under Ohio law, oil and gas leases must be signed and notarized in the presence of a notary public.
"It was common practice of the land agents to have landowners execute their leases in their homes, only to then take the executed lease to a notary, who did not witness the landowners' signature," the complaint says.
Such practice smacks of a similar procedure dubbed "robo signings," in which lenders improperly signed or notarized mortgages or mortgage assignments during the financial crisis, Corroto says.
Plus, he emphasized that landowners must be notified in writing of an attempted assignment of an oil and gas lease within 30 days of the assignment. "Landowners have a right to know who is claiming an interest in their land, and that this statutory notification requirement is an important protection for landowners."
Landowners are seeking termination of the lease, an amount in excess of $25,000 in unjust enrichment, another $25,000 or more in damages because of breach of contract, and at least another $25,000 in damages because of trespassing onto private property.
The latest filing comes as Chesapeake moves forward with its own lawsuit in federal court against 95 landholders in Columbiana and Carroll Counties who are also seeking to terminate leases they initially signed with Anschutz, but are now held by Chesapeake. The group wants to renegotiate the lease terms with another company that has come forth with a more lucrative offer.
Two other lawsuits filed by landowners in Columbiana and Carroll counties were filed against another company, Patriot Energy LLC of Lisbon. Those complaints allege that Patriot acquired leases at rates as low as $5 an acre between 2008 and 2010, and then flipped them the Chesapeake at a rate more than $1,000 an acre.
They also argue, as in the latest filing, that the leases were improperly notarized and should therefore be terminated.
Copyright 2012 The Business Journal, Youngstown, Ohio.