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Chesapeake reaches deal in Pa. royalty cases, contingent on separate suit

Chesapeake Energy Corp. has agreed to settle federal class-action lawsuits in Pennsylvania over gas royalty payments, for a total of $30 million, on the condition that the state attorney general resolve another lawsuit alleging that the company inflated post-production costs, The Philadelphia Inquirer reported Dec. 25.

Under the settlement agreement, Chesapeake would pay all 14,000 of the involved gas leaseholders, and the landowners may amend their lease agreements in a way that clarifies terms for being paid royalties or their share of gas sales, the report said. The average Chesapeake leaseholder is set to receive about $2,140, depending on the size of their property.

Chesapeake's lawyers said the settlement would only push through if Pennsylvania Attorney General Josh Shapiro would resolve a 2015 lawsuit filed by the former state attorney general, Kathleen Kane, which claimed that Chesapeake employed tactics that enlarged deductions from leaseholders' royalty payments.

Chesapeake was said to be the most aggressive among a number of Marcellus gas producers that allegedly deducted post-production costs from royalties, with cases increasing after gas prices declined and the deductions grew, according to the report. The lawsuits claimed that Chesapeake inflated costs by overpaying companies providing services and cutting royalty payments below zero.