new CHK cheating?.....hedging your gas

not sure of the validity of this..........but those TX laywers say it is so.........the following is from a GoHaynesville discussion;

"I sat in on the telecon tonight, 1/21/2015.  Here's what is new:

Aside from the cheating on gathering fees that we all know about, McDonald has found another "more  brash and brazen" cheat.  I'll try to explain it, but I doubt I'll get it right.  It has something to do with how CHK hedged their gas in futures trading.  You have to have physical gas behind whatever futures you trade -- you cannot trade naked futures.  And CHK apparently used all of the gas coming out of the ground (theirs plus ours) as collateral in their futures trading.  Apparently this is really wrong, and McDonald say the royalty owners should be compensated for the risk taken when CHK used our gas as their collateral.  

He estimated that the total amount of cheating comes to, at least, $2/Mcfe.

To date, they've filed almost 100 lawsuits, all in TX.  They file their first OK lawsuits tomorrow.  They have 1000 clients in LA and 1000 in PA.  Lawsuits are being grouped by drilling unit.  They are expecting 40,000 clients by the end of 2015.

Litigation is progressing well.  They have done over 10 depositions of current and former CHK employees, and have 25 more scheduled before the end of February.  They have tons of documents, emails, and letters that have been gathered in discovery.

Note to people in PA:  There are 2 class proceedings currently in PA.  The courts will soon eliminate one.  CHK has made an offer of $11M to settle the one called the "market enhancement clause lease."  This is a pathetic settlement.  McDonald encourages all people in PA to opt out of this suit and join him.

That's it.  Henry here....  I will add that I have a relative in this suit.  I noticed that the suit has been ammended to Include Total (the French oil company, and a partner of CHK) as a defendant.

I will try to listen in every few weeks and update you all with anything new."

http://www.gohaynesvilleshale.com/forum/topics/county-royalty-owner...

Views: 2117

▶ Reply to This

Replies to This Discussion

Permalink Reply by Thomas Lilli on January 23, 2015 at 12:35am
When large [Energy] corporations pull this crap, it really damages the ability for conservatives to support the energy industry and, therefore our interests.

There should be an arm in the API that can have some sort of influence on large O&G companies to keep them honest.
Permalink Reply by David Allen Lilly on January 24, 2015 at 2:12am

I have come to the realization that the only way to handle this is to pay an attorney to make sure the royalty payments are in line with my lease terms.

Class action lawsuits are the ones that scare companies the most, I wish the folks are engaged in litigation well.

I cant stand for folks to be torn off.

Permalink Reply by frank speaker on January 24, 2015 at 2:22am

Attorneys cannot help without the facts at hand. How much did your hydrocarbons sell for? When and to whom were they sold? What was the true processing cost? How much was really produced? You will not know.

0ym9x5ag7ury2Permalink Reply by 0ym9x5ag7ury2 on January 24, 2015 at 6:14am

Frank Speaker,

    That's easy to answer if you have CHK as a producer and they accidentally sent you an office spreadsheet of their theft.

Who did they sell to:  Chesapeake Energy Marketing, and it probably was a hand over of well products not a sale.

When: During the month stated on their spreadsheet (mine now) or my Royalty Statement

How Much: Below Fair Market Price for the month

Processing Cost: Too much since I have a no deductions lease. As high as 178% total deduction for NGLs per their spreadsheet.

How Much Was Produced: Only the NGLs are in question since the ODNR has a record of Oil & Gas produced for the quarter. The number of NGLs processed & charged to Buck Well 1H is always higher than the Royalty Statement Well production. We are are paying for CHKs processing from other wells which more than likely have NO NGL production on record.

If CHK avoids bankruptcy they will take all of Ohio's NGLs free while charging the landowners for processing, processing plants, payments to government entities local and state, and for those ignorant enough to look the other way and think they won't get caught.

As for Oil Prices,  Drop Baby Drop!!! Send those Cowboy's back where they came from.

All of you who are not under production are also not victims of theft, YET!

Permalink Reply by frank speaker on January 24, 2015 at 9:41am

Ron,

Your lease must have some clause stating at what point, which market and when your product has been sold. Mine says I will get a royalty based on what the company actually received. Others say other things

ODNR has a record, but is that record a true record?  Neither they, nor anyone can know, since these production figures are not subject to regular audits and it is not ODNR responsibility. You write about people looking the other way and not expecting to be caught, when it is not their lawful duty to look.

Have you spoken to your state representative and state senator?

0ym9x5ag7ury2Permalink Reply by 0ym9x5ag7ury2 on January 25, 2015 at 8:11am

I've notified the Oho gov, atty gnl, and Director ODNR.

Did you hear the gov and atty gnl are rich all of the sudden? Old campaign money being returned to them if you believe in fairy tales.

My latest notifications begin at the bottom of the state and work up, while starting at the Top of the Federal Government and working down.

I'll work in notifications to State and Federal representatives as well.

I'm confident at some point CHK will be stopped.

Help from OPEC will slow them down and foil CHKs plan to walk away with Ohio's wealth.

Hey, what happened to those who took an oath to protect the people of the state of Ohio but have no interest in what is happening to the landowners today.

I remember the words spoken over the phone in response to my complaint to the atty gnls office, which I wrote down: "Ohio Law Does not apply to CHK, you'll have to get some new laws written which could take years".

That remains to be seen.

Permalink Reply by David Allen Lilly on January 24, 2015 at 7:15am

I will do all I can do, but I am not going to have a stroke worrying about it.

If they get me they get me, I'll let the pros handle it.

Permalink Reply by frank speaker on January 24, 2015 at 9:14am

That is good medical advice, but shaky legal. Without a regular state audit of metering pipeline and tanker records, against  production figures and sales records, hedges and other contracts, the system is wide open to fraud and abuse. In such a situation, there are no pros.

The least, and the most effective thing people can do right now is contact their state legislators and demand legislation instituting inspections and audits of the O&G industry.

0ym9x5ag7ury2Permalink Reply by 0ym9x5ag7ury2 on January 25, 2015 at 8:16am

David,

    The best way to prevent a stroke is to write down your complaints and send them to the state authorities. Let them handle the problem or tell you why there is nothing that can be done.

Then there's the Feds with plenty of departments to write to. When they get done with the latest NY corrupt politicians they may show up in Ohio.

Who knows where CHK money could show up. 

0ym9x5ag7ury2Permalink Reply by 0ym9x5ag7ury2 on January 25, 2015 at 8:22am

David,

      Did you check the price tag for your pros?

They probably know how to stop the theft but prefer to handle this out of court.

Permalink Reply by Booger on February 12, 2015 at 3:50am

another update from the dude on the Haynesville site about this......kindof interesting.

"I listened in on the teleconference last night (2/11/2015).  Here are a few new things I learned...

The speaker was not Dan McDonald.  Instead, it was another attorney (I missed his name) from a different firm, who is helping on the case.  The attorney made the point that his firm was only helping.  No cases would be referred out to them or other firms.  All cases will have the McDonald Law Firm as the lead attorney.

He told a bit more of the story on Access and Total (the French oil giant).  He said that when Access bought out Chesapeake's gathering system, Access demanded a monthly minimum payment from CHK, regardless of how much gas went through the line.  Apparently Access drove a hard bargain, and this is what got CHK into trouble.  The minimum was so high, that CHK started losing money.  So when Total started looking at CHK's acreage, when they were going to buy into a JV, they told CHK that they were not going to pay these crazy high transportation fees.  They told CHK to pass that charges onto the royalty owner, and CHK agreed.  At that point, people's monthly checks plummeted.

I learned a bit more on the hedging issue.  Apparently, CHK hedged the gas that belonged to the royalty owners.  And apparently they were very successful at this -- when it came time to sell the royalty owners' gas, the hedged price that CHK received was much higher than the market value.  So CHK paid the royalty owners the market value and kept the difference as profit for themselves.  The McDonald Law Firm thinks that the royalty owners should have received the hedged price, and they are trying to recover that as part of this lawsuit.

Another fraudulent practice was discovered.  This was more limited.  There were people who had multiple wells in their unit.  CHK would shut one well in, and tell the owners all the wells were shut in.  However, they would continue to pump gas, from the non-shut-in wells and not pay the royalty owners.

The speaker cautioned mineral owners in both OK and PA that there are class action suits going on there now that are approaching a settlement.  He judged the proposed settlement amounts to be very, very low.  If you live in PA or OK, you will be receiving a notice that says you are part of the class, unless you choose to opt out.  If you don't actively opt out, you will be forced to take the settlement and cannot join the MacDonald effort.  He said that if you join the MacDonald effort, they will ensure that you get opted out. [Henry here.... I am just repeating what the speaker said.  Don't take this as any advice from me as to what you should do.]

The speaker ended by answering some questions that they often get at the town hall meetings...

1.  What happens if CHK goes bankrupt?  Answer:  You probably don't get paid.  You become one of their many creditors.  However, they don't think CHK is going bankrupt.  [Henry here.... Remember, MacDonald wants to get paid too.  They would not waste their efforts, if they thought CHK could not pay.]

2.If I sue CHK, can they counter sue me?  Answer:  Yes.   However, this has not happened to date.  It would be hard to see what CHK could actually sue you for, since you are a passive royalty owner.  Also, the PR would be bad for CHK.

3. Who decides whether to go to trial or accept a settlement?  Answer:  Each person makes his/her own choice.  If 99 people in a section want to settle and one wants to go to trial, then 99 will get a settlement and one will go on to trial.  

4.  Can CHK suspend my payments since I'm suing them?  Answer: Yes.Most gas leases allow this.  But it has not happened yet.

That's it.

Henry here....  Personally, I'm still confused/conflicted over the hedging issue.  Yes, I understand they made money by using the royalty owner's gas to hedge.  However, they did pay the royalty owner what was outlined under the terms of the lease.  If CHK had lost money by doing this, the royalty owner would be demanding payment of what was outlined in the lease, so I have trouble seeing why CHK owes the royalty owner more.  This seems to me to be a risk that CHK took -- it could have gone well, or poorly.  Maybe this is something for the Commodity Futures Trading Commission to look at -- is it legal?  I have no clue."

Permalink Reply by David Allen Lilly on February 13, 2015 at 2:19am

Thanks Booger.

I am prepared to do what I must if my royalties are not what they should be. My lease allows for some auditing once or twice a year if I dispute the royalty amount paid to me.

As an aside, I was traveling from Erie PA to Guernsey county this week and saw a newer VW bug, green in color I think, with a "booger" license plate from Ohio.

I immediately thought of you.

RSS

© 2024   Created by Keith Mauck (Site Publisher).   Powered by

Badges  |  Report an Issue  |  Terms of Service