Pa. Supreme Court ruling erodes Marcellus Shale royalty cheating case by Laura Legere, March 26, 2021, Pittsburgh Post-Gazette
The Pennsylvania Supreme Court ruled Wednesday that the attorney general cannot use the state’s consumer protection law to make claims on behalf of landowners with natural gas drilling leases, dealing a blow to the state’s remaining case alleging Marcellus Shale companies misled and underpaid property owners.
In a 6-1 decision, the court reversed a lower court ruling and said the Pennsylvania Unfair Trade Practices and Consumer Protection Law only protects buyers, not sellers, that have been harmed in a transaction. In an oil and gas lease agreement, the landowner is the seller, the court said.
The attorney general’s office had largely relied on the consumer protection law in seeking to recover lost royalty payments and damages for landowners whom state lawyers said had been cheated by deceptive business tactics by Chesapeake Energy Corp. and Anadarko Petroleum Corp.
Attorney General Josh Shapiro settled the case with Chesapeake earlier this month for $5.6 million in landowner payments and legal costs after the Oklahoma-based natural gas company filed for bankruptcy.
The remaining case applies only to Anadarko, which is accused of misleading landowners about how their royalties would be calculated and colluding with Chesapeake to keep bonus and royalty payments low by agreeing not to compete for leases in northeastern Pennsylvania.
Anadarko was acquired in 2019 by Texas-based Occidental Petroleum Corp., which declined to comment on the ruling.
In the majority opinion, Justice Sallie Updyke Mundy wrote that the Supreme Court found the state’s consumer protection law “clearly regulates the conduct of sellers, and it does not provide a remedy for sellers to exercise against buyers.”
Because of that, the court concluded, the attorney general’s office cannot bring claims under the consumer protection law on behalf of private landowners who allege they were deceived into signing unfavorable gas leases.
The lower Commonwealth Court had backed the attorney general’s novel reading of the law, saying that the state Legislature had intended for the consumer protection law to be interpreted liberally to benefit the public and to root out deceptive business practices regardless of whether the companies were considered buyers or sellers.
Lawyers for both landowners and gas companies had said the attorney general’s case was risky because it largely hinged on the untested theory. An attorney for Chesapeake said in 2017 that a rejection of the attorney general’s reading of the law — like the one the Supreme Court handed down Wednesday — would mean “a complete collapse” of the state’s case.
The attorney general’s office made a separate claim based on antitrust common law that the companies unreasonably restrained trade through their agreement to divvy up northeastern counties. That claim was not part of the appeal and was not considered by the court.
The attorney general’s office said in a statement that it is “committed to standing up for landowners who are cheated and we will continue this fight on our remaining antitrust count.”
“We are reviewing this opinion and have plans to engage legislators on this matter to update Pennsylvania laws to better protect those misled by corporations like this one,” the office said.
Gas drilling firms defeat Pennsylvania’s anti-trust lawsuit by Marc Levy, The Associated Press, March 25, 2021, witf
(Harrisburg) — Pennsylvania’s highest court has delivered a victory for natural gas exploration firms, ruling that the state attorney general’s office doesn’t have authority under state law to sue them on anti-trust grounds over their mineral rights-leasing practices.
The bid by the attorney general’s office to pursue an anti-trust action under state law had attracted the close attention of major business groups in Pennsylvania.
But the state Supreme Court, in a 6-1 decision late Wednesday, overturned lower court decisions and agreed with Texas-based Anadarko Petroleum Corp. that state consumer protection law does not allow sellers to take action against buyers.
As a result, the court declined to rule on whether the attorney general’s office has the legal authority to pursue an anti-trust action under the law.
The attorney general’s office sued in 2015, accusing Anadarko and Chesapeake Energy Corp. of Oklahoma City of eliminating competition and shortchanging landowners of signing bonuses and royalties by divvying up counties in northern Pennsylvania in which to lease mineral rights.
Anadarko had argued that it was not a seller of services and not subject to action under state consumer protection law. The companies were buying mineral rights in land leases, not selling, they contended.
Landowner advocates say the ruling underscores the need for new laws to offer leasing protections and to guarantee a percentage of royalties.
“It just seems like ruling after ruling is coming down in favor of the oil and gas companies, handing them all the cards and all the money,” said Jackie Root, with the Pennsylvania Oil and Gas Landowner Alliance.
In a statement, the AG’s office said it is reviewing the opinion and plans to work with lawmakers “to update Pennsylvania laws to better protect those misled by corporations like this one.”
It noted a separate antitrust claim against Anadarko is still active.
Occidental Petroleum Corp. bought Anadarko in 2019. It declined to comment on the ruling.
Chesapeake’s appeal was dropped from the case last year when it filed for federal bankruptcy protection.
Refer also to:
And, the winner is … drum roll … Chesapeake (and the new ombudsperson). Attorney General Josh Shapiro settles with shyster frac company for $5.3 Million for royalty restitution for PA landowners. Who pays for the $7 Billion in magic money given to Chesapeake by the bankruptcy judge?
Judge lets nasty frac’er escape bankruptcy, rules Chesapeake is worth $1 Billion more than the company does, sets free $7 Billion in debt, gives “big payday” to some, says to CEO Robert Lawler: “To remember that a lot of people have suffered a lot of pain for Chesapeake to have a second chance….”
DEP data shows bankrupt Chesapeake drilling new wells; Did Chesapeake file for bankruptcy to avoid paying outstanding royalties owed and avoid paying fines for criminal charges possibly up AG Josh Shapiro’s courageous sleeves? The company’s timing is suspect.
After paying 5 times maximum fine to escape criminal charges and finding it “could not develop the necessary techniques to drill and complete Collingwood wells…to obtain a favorable rate of return,” Encana/Ovintiv leaving Michigan Lucky Michigan!
Attorney General Bill Schuette: Encana and Chesapeake Energy criminally charged with colluding to keep oil and gas lease prices artificially low in Michigan; Also face separate, federal antitrust investigation by Department of Justice