Chesapeake Loses in New York and Pennsylvania

natural gas

Thursday wasn’t a good day for Chesapeake Energy (NYSE:CHK). The company is being forced to give up a substantial chunk of land in New York, as the state has banned the practice of hydraulic fracturing, or fracking, for the past six years, and it doesn’t look like it will lift that ban anytime soon. Chesapeake also has to pay a $7.5 million settlement to Pennsylvania landowners who accused the company of making illegal deductions from their royalty payments.

The issue of the land Chesapeake owns in New York was first reported on by Reuters, which said the company is giving up 12,000 acres of land it has leased in the state but has been unable to use because of New York’s ban on fracking. The company has been in a legal battle with the owners of that land, who have been fighting for increases on their leases.

The Reuters report said that those 12,000 acres are a small portion of Chesapeake’s 2.5 million acres leased across the U.S. to drill for natural gas. It is significant for New York, though, where Chesapeake is one of the state’s biggest leaseholders. Energy companies have grown increasingly frustrated with the state, where drilling has been basically banned since 2008.

Separately, in Pennsylvania, Chesapeake has agreed to pay $7.5 million to settle a class-action lawsuit with landowners who claimed the company made improper deductions and shorted them on royalty payments, according to a report from the Tribune-Review. Chesapeake had come under fire in the state for being aggressive about taking deductions out of royalty payments earlier this summer, and both parties agreed to solve the dispute through mediation. Chesapeake had objected to many of the accusations made in court, and refused to comment after the settlement was announced.

According to Reuters, the move to give up on the land in New York was a smart decision, and shows that the company is cutting costs after a land-buying spree left Chesapeake in debt. Choosing to settle the Pennsylvania case rather than remain engaged in drawn-out litigation seems to be a move along the same lines.

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