Chesapeake, McClendon endure rocky year; Operators Take out Liens on Landowner Properties for Chesapeake’s Unpaid Bills

SPECIAL REPORT: Chesapeake, McClendon endure rocky year; more uncertainty ahead by Brian Grow, Anna Driver, Joshua Schneyer and Carrick Mollenkamp; editing by Blake Morrison and Michael Williams, December 27, 2012, Reuters UK
The lawsuit by Otis Eastern says contracts with Chesapeake and its affiliates were signed before the sales occurred. Chesapeake remains a defendant in the suit, and Africano, the attorney for Otis Eastern, said Otis intends to continue its litigation until it receives the balance of what it says it is owed. … Otis Eastern isn’t the only company upset with Chesapeake and its affiliates. Interviews with attorneys for contractors in Texas, New York and Pennsylvania, and a review of county court records, show Chesapeake fell behind on a variety of bills this year. Those affected extend beyond the contractors, too:

* On Nov. 2, a New Jersey construction and drilling company filed a lien against property leased by Chesapeake in Bradford County, Pa. The company, Carson & Roberts, says Chesapeake owes it $859,000.

* On Dec. 7, two New York contractors also filed liens in Bradford County. They say they are owed $1.8 million for work on a natural gas compression station there.

* And on Dec. 20, a Minnesota drilling contractor filed three liens on properties leased by Chesapeake in Bradford County. The company claims it is owed more than $725,000.

Chesapeake may have transferred the debts owed to contractors, but the company is still listed as the debtor in the non-payment suits. And the liens filed for non-payment show up as claims against land owners with whom Chesapeake cut deals. Such liens could interfere with an owner’s ability to sell the property, said Stanley B. Edelstein, a Philadelphia construction law attorney. “Depending on the language in a mortgage, it could be an act of default,” he said. Bradley Sink and his wife, Beatrice, own the land where construction company Carson & Roberts filed its lien against Chesapeake. Sink, a retired farm equipment dealer, did not know the lien had been filed until he was contacted by a reporter. “I’m not real thrilled with having a lien on the property,” said Sink, who referred the issue to his attorney. Chesapeake declined to comment on the liens when asked by Reuters.

Among the legal hurdles facing Chesapeake, one of the most serious is a federal inquiry by the Department of Justice’s Antitrust Division. The probe came after Reuters reported that Chesapeake and Canadian rival Encana Corp worked to suppress land prices in Michigan in 2010. … One of the emails came from John Schopp, a vice president at Encana. It was sent to Chesapeake’s executive vice president of acquisitions and divestitures, Doug Jacobson. Dated June 17, 2010, the email was copied to Jeff Wojahn, president of Encana USA. Neither Encana nor Chesapeake would comment on the emails. … Darren Bush, a former Justice Department anti-trust attorney, said the emails and proposal comments were likely to be “deeply troubling” to Justice Department investigators already examining Chesapeake and Encana communications.The emails and comments show “the purpose is to make sure that they are not bidding each other up,” said Bush, now a professor of anti-trust law at the University of Houston. … The ongoing Justice Department and Michigan Attorney General probes have stymied Chesapeake’s plan to sell its Michigan acreage. In June, the company put up for sale 450,000 acres, for which it says it paid $400 million. A sale was expected by Aug. 31. Since then, no prospective buyers have been disclosed. The investigations could take years to resolve, antitrust experts say. [Emphasis added]

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