Chesapeake Energy Ordered to Pay Michigan Landowner/Mineral Owners Disputed Oil and Gas Lease Bonus

Landowners who are eligible for the settlement will be notified by mail from the Attorney General’s Office.

In 2010, Chesapeake Energy refused to pay lease bonuses on signed oil and gas leases. These bonuses were up to $3,500 per acre. This was devastating to many landowner/mineral owners, many of which had negotiated this payment as part of lease negotiation, or had an oil and gas attorney negotiate on their behalf.

During the summer of 2010, Michigan State University Extension and the State of Michigan Office of Oil, Gas and Minerals held nine public oil and gas leasing and oil and gas industry educational workshops in Northern Michigan. Total attendance was 2,179. Landowners and mineral owners were being contacted by representatives of oil and gas companies and were being offered an oil and gas lease to sign. For many, this was the first time they had an opportunity to lease their oil and gas rights. They wanted information to educate them on oil and gas production and the leasing process.

Workshop Topics included:

  1. Unconventional Shale Gas Development
  2. The Department of Oil, Gas and Minerals role in oil and gas production and regulation of the industry
  3. Understanding the oil and gas lease
  4. Bringing it all together in a negotiated win-win lease.

Susan Topp of Topp Law frequently volunteered her time to speak at these workshops, discussing the oil and gas lease contract and negotiating the lease.

During the summer of 2010, many landowners signed leases with representatives of Chesapeake Energy Corporation. Not long after signing, the oil and gas leasing market collapsed. Chesapeake in their review of the signed leases disqualified them and refused to make payment for various reasons that some experts, including Susan Topp felt were not legitimate. 

On October 21, 2010 Michigan State University Extension, along with attorney Susan Topp, held an informational meeting at the Emmett County Community Building. The title of the meeting was “Duties and Obligations of an Oil and Gas Company under the Lease and Order for Payment.” The goal of the workshop was to help landowner/mineral owners understand the issues and inform them of their legal options going forward.

Over 130 people joined together and hired Susan and filed civil actions against Chesapeake. Over the years, many settled with Chesapeake for a total of $19 million, which was less than the contracted bonus. Encana, USA honored their leases and paid the lease bonus. 

The Michigan Attorney General’s Office felt laws were broken and filed criminal complaints against Chesapeake and Encana, USA. In May of 2014, Encana, USA settled for $5 million with the state. Chesapeake chose to go to trial and during the trial, has agreed to pay a settlement of $25 million. The $25 million will bring total compensation to $44 million and all qualifying landowner/mineral owners that signed leases with Chesapeake may be eligible to be compensated 100 percent for their losses. The victims named in the criminal complaints filed by the Attorney General’s Office are the only mineral owners that can have their attorney fees reimbursed due to criminal law limitations.

It is estimated there are more than 700 landowner victims. The time frame for filing claims has not started yet. Once the fund is established, landowners have 120 days to file the claim. Any landowners who are eligible for the settlement will be notified by mail from the Attorney General’s Office. If anyone has any questions about the fund, eligibility, or filing a claim they should contact Assistant Attorney General Scott L. Teter, 517-373-1160 or by email at .(JavaScript must be enabled to view this email address) and their questions will be answered at NO cost to them.

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