Joe Drake (Abrahm  Lustgarten  for Propublica)

This story was co-published  with The Daily Beast.

At the end of 2011, Chesapeake  Energy, one of the nation's  biggest oil and gas companies,  was teetering  on the brink of failure.  Its legendary  chief executive  officer, Aubrey  McClendon,  was being pilloried for questionable  deals,  its stock price was getting  hammered  and the company  needed to raise billions of dollars  quickly.

The money could be borrowed,  but only on onerous terms.  Chesapeake,  which  had burned money on a lavish steel­ and-glass  office complex  in Oklahoma  City even while the selling price for its gas plummeted,  already  had too much debt.

In the months that followed,  Chesapeake  executed  an adroit escape,  raising nearly $5 billion with a previously undisclosed  twist:  By gouging many rural landowners  out of royalty payments they were supposed  to receive in exchange  for allowing the company  to drill for natural gas on their property.

In lawsuits in state after state, private  landowners  have won cases accusing  companies  like Chesapeake  of stiffing them on royalties they were due. Federal investigators  have repeatedly  identified  underpayments  of royalties for drilling on federal  lands, including  a case in which Chesapeake  was fined $765,000 for "knowing  or willful submission of inaccurate  information"  last year.

Last month, Pennsylvania  governor  Tom Corbett,  who is seeking reelection,  sent a letter to Chesapeake's  CEO saying the company's  expense billing "defies  loqlc" and called for the state Attorney  General to open an investigation.

The losers were landowners  in Pennsylvania  and elsewhere  who leased their land to Chesapeake  and saw their hopes of cashing in on the gas-drilling  boom vanish without explanation. People  like Joe Drake.

"I got the check out of the mail. .. I saw what the gross was," said Drake, a third-generation   Pennsylvania  farmer whose monthly  royalty payments for the same amount  of gas plummeted  from $5,300 in July 2012 to $541 last February.   This sort of precipitous  drop can reflect gyrations  in the  price of gas. But in this case,  Drake's  shrinking check resulted from a corporate  decision  by Chesapeake  to radically  reinterpret  the terms of the deal it had struck to drill on his land. "lf you or I did that we'd be in jail," Drake said.

Chesapeake's  conduct  is part of a larger national pattern  in which  many giant energy companies  have maneuvered  to pay as little as possible  to the owners of the land they drill. Last year, a ProPublica  investigation  found that Pennsylvania  landowners  were paying ever-higher  fees to companies  for transporting  their gas to market,  and that Chesapeake  was charging  more than other companies  in the region. The question was •why"?

ProPublica  pieced together  the story of how Chesapeake  shifted  borrowing  costs to landowners  from  documents  filed with the U.S. Securities  and Exchange  Commission,  interviews with landowners,  people who worked  for the company and employees  at other oil and gas concerns.

The deals took advantage  of a simple economic  principle:  Monopoly  power.

Boiled down to basics, they worked  like this: When energy companies  lease land above the shale rock that contains natural gas, they typically  agree to pay the owner the market price for any gas they find, minus certain expenses.

  
Federal rules limit the tolls that can be charged on inter-state  pipelines  to prevent gouging.  But drilling companies  like Chesapeake  can levy any fees they want for moving gas through  local pipelines,  known in the industry  as gathering lines, that link backwoods  wells to the nation's  interstate  pipelines.  Property owners have no alternative  but to pay up. There's  no other practical  way to transport  natural gas to market.

Chesapeake  took full advantage  of this. In a series of deals, it sold off the network  of local pipelines  it had built in Pennsylvania,  Ohio,  Louisiana,  Texas and the Midwest  to a newly formed  company that had evolved out of Chesapeake  itself, raising $4.76 billion in cash.

In exchange,  Chesapeake  promised  the new company, Access  Midstream,  that it would send much of the gas it discovered  for at least the next decade through  those pipes. Chesapeake  pledged to pay Access  enough  in fees to repay the $5 billion plus a 15 percent retum on its pipelines.

That much profit was possible only if Access charged  Chesapeake  significantly  more for its services. And that's exactly what appears to have happened:  While the precise details of Access'  pricing remains private,  immediately after the transactions  Access  reported to the SEC that it collected more money to move each unit of gas, while Chesapeake  reported that it also paid more to have that gas moved. Access  said that gathering fees are its predominant  source of income, and that Chesapeake  accounts  for 84 percent of the company's  business.

What's  more, SEC documents  show, Chesapeake  retained a stake in the gathering  process. While Chesapeake collected  fees from landowners  like Drake to cover the costs of what it paid Access to move the gas, Access  in turn paid Chesapeake  for equipment  it used to complete  that process,  circulating  at least a portion of the money back to Chesapeake.

ProPublica  repeatedly  sought comment  and explanations  from both Chesapeake  and Access  Midstream  over the course  of several months.  Both companies  declined to make executives  available  to discuss the deals or to respond to written questions  submitted  by ProPublica.

Days after the last of the deals closed,  Drake and other landowners  learned the expense  of sending their gas through Access's  pipelines would  eat up nearly all of the money they had been previously  earning from their wells. Some saw their monthly checks fall by as much as 94 percent.

An executive  at a rival company  who reviewed  the deal at ProPublica's  request said it looked like Chesapeake  had found a way to make the landowners  pay the prinCipal and interest on what amounts  to a multi-billlon  loan to the company  from Access  Midstream.

"They were trying to figure out any way to raise money and keep their company  alive,"  said the executive,  who declined to be named because  it would jeopardize  his dealings  with Chesapeake.  "l think they looked at it as an opportunity  to effectively  get disguised  financing ... that is going to be repaid at a premium."
.......

At 54, Joe Drake guns his six-wheeler  up a steep rock-rutted  trail on the backwoods  of his 494-acre  tract and points to his property  line, marked by a large maple in a sea of indistinguishable  trees. He knows where it lies, because  as a kid his father  made him walk that line to string barbed wire. The wire is long gone, but a rusted snag remains entombed  in the bark. Back then, the Drakes ran a dairy farm in these  pastures.

"It's just something  you've got in your blood that you do," Drake said. "But dairy farmers are a dying  breed ...  It was a good way of life. Today, the milking stalls have been ripped out of a long bam that still carries the stench of their manure,  but stores 20 -foot stacks of bailed hay instead.  Drake sold all 187 head of cattle two years ago, pinched  by regulated  milk prices and the rising costs of independent  farming.  He took out a second mortgage  to keep the farm afloat.

  
Across the road, past his house and just beyond  a stand of oak and ash, the hillside's  natural shape transitions  to a steep slope of pushed  dirt, capped  by a 7-acre flat the size of a large gravel parking  lot. In the middle  stands a 6-foot stack of steel pipes and valves -  a gas well.

When Chesapeake  arrived at Drake's  door, he was optimistic.  Drake plastered a "Drill, baby, drill" bumper sticker in the window  of his Ford F-250 pickup.  He welcomed  the chance todraw   an easy income from his land, and was unswayed  when his neighbors  raised questions  about the environmental   risks of drilling. Chesapeake  promised  Drake one-eighth  the value of whatever  it made from  his well.  It seemed  like a fair deal.

If any driller was going to make money for Drake, he thought,  it would be Chesapeake.  The company  had built an empire off finding  and drilling natural gas discoveries  as the fracking  boom rolled across the country. With uncanny foresight,  its founder,  McClendon,  locked up exclusive  access to immense  tracts of land across the country  by promising  property owners that their lives would be transformed  by the wealth the gas under it would  bring.

Then the company  drilled furiously  -- in Oklahoma,  then Texas,  Louisiana  and later in Pennsylvania's   Marcellus  Shale -  catapulting  itself to the rank of second-largest  producer  of natural gas in the United States.  It made McClendon  - who snatched  up a stake in the Oklahoma  City Thunder  basketball  team and moved into a stone mansion  in the posh Oklahoma  City suburb of Nichols  Hills -  one of the richest men in the world.

McClendon  -  named by Forbes in 2011 as "America's  Most Reckless  Billionaire"  -  would find his way into plenty of personal trouble.  He took a personal  stake in Chesapeake's  wells, and then liquidated  his stock in the company  in order to cover his own losses, rattling  investors  and ringing corporate  governance  alarm bells. He drew scrutiny for selling his $12 million antique  map collection  to the company  and ire for taking a $75 million bonus as Chesapeake struggled.

In 2012, he borrowed  as much as a billion dollars from the company's  private equity partners to fund his private interests.   Separately,  an investigation  by Reuters alleged  Chesapeake  had rigged land leasing prices in Michigan, under McClendon's  direction,  sparking a federal criminal  probe.

But McClendon's  overarching  design for the business  nonetheless  made it a formidable  player. Chesapeake aggressively  pursued  business  opportunities  beyond  its drilling. It created  interlocking  businesses  and took advantage of tax breaks that deliver out-sized  benefits to energy companies.

By structuring  itself this way, Chesapeake  eamed  a slice of profit from each step. Chesapeake's  subsidiaries  trucked the drilling materials,  drilled the wells, fracked  the gas, gathered  and piped it away to a hub, and then marketed the end product -  what economists  call vertical integration.  In fact, he built Chesapeake  into a powerhouse,  an echo of the old Standard  Oil empire, positioned  to control almost  every variable  and armed with the leverage  to get its way.

Neither McClendon  nor his staff responded to requests  for comment  for this article.

From early on, the company  viewed  the local pipelines  as a profit source.    Chesapeake  formed  subsidiaries  to build and run the lines, then spun them off into a separate,  publicly traded company.  That company  would eventually evolve into Access  Midstream,  when Chesapeake  sold its shares -  one of the three deals - for $2 billion in 2012.

The strategy  paid dividends.  At Chesapeake's   headquarters,  a group of new, distinctively-designed   office buildings went up, with views south over the state capital and the city's small skyline. The company  lavished its employees  with perks, too. "They've  got a 72,OOO-square-foot gym, free trainers ... free Thunder  tickets," said Andrea  Watiker, who scheduled  pipeline capacity for gas traders in one of the company's  new towers.

Confident  he was in good hands,  Drake endured  the trucks,  dirt and noise that accompanied  gas drilling and signed agreements  that allowed Chesapeake  to run pipelines across  his fields. To transport  the gas from  Drake's well, Chesapeake  built a pipeline that stretched  south from within spitting  distance of the New York border, cutting a wide swath through  the forest. Then it went down beyond the white-spired  church in Litchfield,  and ran some 35 miles further to its handoff at the Tennessee  interstate  pipeline near the Susquehanna  River.  What Drake didn't know at the time was that the pipeline was more than a way to move his gas to market.  It would become  part of a strategy to make more money off of Drake  himself.
**.

When the first gas flowed from the well on Drake's  land in July 2012, it was abundant,  and the royalty checks were fat. "We was hoping to get these  loans paid off ... with the big money," said Drake, who earned more than $59,400 from the first few months  of production,  referring  to the mortgages on his farm.

That year, many Pennsylvania  landowners  began  receiving  similarly sized payments  as thousands  of new wells - many of them drilled by Chesapeake  -- finally  began producing  gas. Pennsylvania  fast approached  Texas  as the largest source of natural gas in the country,  and with it, the prosperity  long promised to this rural part of the United States seemed about to arrive.

But then, in January  2013, without warning  or explanation,  the expenses  withheld  from Chesapeake's   royalty checks for use of the gathering  pipelines tripled.  Drake's  income dwindled.  His contract with Chesapeake  -  and Pennsylvania law that sets a minimum  royalty share in the state -  promised  him at least 12.5 percent  of the value of the gas. Drake says the company  led him to believe any expenses  would be negligible.  "Well, they lied."

A few miles away, the same month, his brother-in-law  had 94 percent of his gas income withheld to pay for what Chesapeake  called "gathering fees.'  Others across the northern  part of the state also saw their income slashed. "I've got a stack,"  said Taunya  Rosenbloom,  a lawyer representing  Pennsylvania  landowners  with natural gas leases. She pulled the statements  of all of her Chesapeake  clients into an eight-inch  pile on her desk. "Everyone  is having this issue." Drake found the statements  Chesapeake  mailed him each month mystifying.  He pored over the papers,  hired a lawyer, compared  notes with his neighbors,  but couldn't  make sense of the charges.

Other Pennsylvanians  were similarly baffled.  Sometimes,  Chesapeake  charged different fees to neighbors  whose wells fed into the same gathering  line. Other times, companies  that had partnered with Chesapeake  on the same well charged vastly  less for expenses.  No one at the Chesapeake  could seem to explain how the charges were set.

"There  is no rhyme or reason why one client would have such an exorbitant  amount taken out when  another no more than 3 miles away has only 20 percent of their royalty taken," said Harold Moyer, an accountant  in Bradford  County, Pa., who represents  more than 150 landowners  with royalty rights. Moyer said he saw a dramatic  difference  between what Chesapeake  usually charged  compared  to other energy companies  in the area.

Different contracts  may entitle Chesapeake  to charge varying amounts.  Some of the leases examined  by ProPublica limit a landowner'S share of expenses  to 12.5 percent -  or the same as their share of the proceeds.  Other contracts prohibit  Chesapeake  from withholding  any expenses  at all. Drake's  contract  appears to allow Chesapeake  to recoup as much money as it wants;  it stipulates  that he can be charged for the expense  of gathering  and transporting  his gas without  specifying  his share of such expenses.

Gas drillers differ Significantly in how much they charge landowners  for expenses.  The Norwegian  energy company Statoil owns a portion of the gas extracted from  Drake's well, as well as a portion of the gathering  line that moves the gas to an interstate  pipeline. Yet Statoil rakes off virtually  nothing for its expenses,  according  to its statements.  Statoil told ProPublica  that it sells its gas independently  and makes decisions  about billing separately  from  Chesapeake.

"When it comes to deciding which,  if any, deductions  are appropriate,  we make that assessment  according  to the terms of each lease and the applicable  laws,• wrote Ola Morten Aanestad,  in an e-mailed  response  to questions.

Orake peers out the window,  over the hills that descend from  his porch into a valley  brightening  with the changing colors of fall, and scowls.  He can't stand being indoors. He's worried  that he'll spend most of next hunting season here at this table, trying to decipher  Chesapeake's  statements.  His monthly  gas statements  pile up, unorganized,  on the kitchen table, below a rack of deer antlers and beside two empty cans of Coors Light and a camouflage  baseball cap.

Drake's  gathering  pipeline only extends  a few dozen miles, far less distance than the interstate  pipeline  it feeds into that carries his gas through  New Jersey towards  White Plains,  NY. Yet public documents  filed with the Federal Energy Regulatory  Commission  show it only cost about $.38 -  on average -- to move a unit of gas on the interstate system -  a fraction  of the $2.94 Chesapeake  charged Drake to move a unit of gas a vastly  shorter distance  that February."Nobody can tell you why or how come,"  Drake said. "They pass the buck, they tell you to call this person, and you are lucky if you can even get an answering  machine.•

Chesapeake  declined to explain its charges  to Drake or to ProPublica.  When a ProPublica  reporter visited Chesapeake's  headquarters  in Oklahoma  City, the company's  director  of external  communications   sent a message that he was "booked solid" and couldn't talk .

..**

There has long been dispute over how drilling companies  calculate  royalty payments  due landowners.  A 2007 report commissioned  from a forensic  oil and gas accountant  by the National Association  of Royalty Owners (NARO) -  an organization  representing  landowners  in their dealings with the oil and gas industry -  found that almost every company  it examined  had "used affiliates  and subsidiaries  to reduce income to royalty owners and taxing authorities. "

charging  landowners,  on average, 43 percent  more than what they actually paid to handle the gas. (Neither Chevron  nor Chesapeake  provided  information  about their expense deductions. )
ConocoPhillips  and BP declined to comment  for this article. Chevron did not respond to a request for comment.

Other companies  have been ensnared  in similar controversies.  The giant pipeline company,  Kinder Morgan, which also declined  to speak to ProPublica,  has been accused  by Montezuma  County, Colo., of overstating  its transportation   and other expenses,  and underpaying  $2 million in taxes as a result. (Kinder Morgan  has paid that bill, but is appealing the decision.)  Chevron has faced multiple lawsuits for underpaying  royalties and overstating  expense deductions  because of alleged self-dealing  through  its affiliate  relationships,  including a 2009 case the company settled with the U.S. Department  of Justice for $45 million.

"Every company  has been involved,"  said Jeffrey  Matthews,  a vice president  and forensic  accounting  expert at Charles  River Associates,  a consulting  firm, in a lecture to landowners  and oil and gas industry accountants  in Houston.  "If you're  dealing with related parties,"  the technical  term for the sort of inter-lOCking subsidiaries  created  by Chesapeake,  "the costs can be double,  or triple. You don't know if you are paying for something  two to three times over."

Even so, Chesapeake  stands out among its peers and is widely  known to interpret contracts to match its strategies, executives  in the oil and gas industry say.  The company  has faced numerous  lawsuits -  filed by the billionaire  Ed Bass, and the city of Fort Worth,  among others -  claiming  it misrepresented  its expenses.  Chesapeake  has paid hundreds of millions  of dollars in settlements  and judgments  in such cases, including  a $7.5 million settlement  with Pennsylvania  landowners  last fall.
  
One Oklahoma  lawsuit, brought  by other oil companies  that had partnered  with Chesapeake,  alleged that Chesapeake   cheated them out of the final sales price of their gas and artificially  inflated its operating expenses,  in part by folding  in the salaries of high-level  management,  the cost of seminars  they attended, and rent and office expenses  for field offices. The suit was settled  in late 2004 for $6.5 million.  Chesapeake  denied any wrongdoing,  and the settlement  explicitly  states that Chesapeake  did not agree to "chanqe the practices  complained  of'  in the lawsuit.

"They were  making excessive,  unwarranted,  and unauthorized  charges:   said Charles Watson,  an Oklahoma  attorney involved  in the case. "I don't think it's mistaken  interpretation,  I think it's an intentional  accounting  maneuver  to reduce the amount  of money going to the royalty owners  and increase the amount of money going to the operator."

Chesapeake  declined  to comment  about the case.

For Drake to know how Chesapeake  calculated  his gathering  costs, he has to pay lawyers and accountants  to audit the company, or take his grievance  to arbitration,  a process that would  cost him tens of thousands  of dollars.  In either case, he would  need to see the purchase  agreements  that describe the company's  gas sales in detail. They list far more precisely than Drake's  own statements  exactly what costs were incurred,  how much gas might have been lost along the way or used by the company  for its own purposes,  what marketing  fees Chesapeake's  subsidiary  charged, and the final, real price of the gas.

But Chesapeake  isn't required to share these agreements.  They are proprietary."When it comes to production  expense,"  said Charles River's Matthews,  "you're at their mercy: ......The deals that led to much higher expense  charges for Drake and his neighbors  involve  some sophisticated  financial engineering.

Over  12 months, Chesapeake  sold off a significant  portion of its nationwide  system of gathering  pipelines  in three separate  transactions.  By December  2012, almost  all of the pipes were controlled  by a single company­ Chesapeake's  former affiliate, Access  Midstream.  Taken together,  the sales brought $4.76 billion in cash into Chesapeake's  coffers.

The reason behind the moves was simple: All that profligate  spending -  the Oklahoma  City offices,  corporate jets and huge executive  salaries  -- had come at  roughly the same time that the price of gas tumbled to historic  lows, analysts at several Wall Street investment  firms told ProPublica.  Chesapeake  "desperately  needed cash," observed  Tony Say, who once headed Chesapeake's   Marketing  division - the same part of the company  that now handles transportation for the gas.

In its securities  filings, Chesapeake  said that the deals brought the company  $1.76 billion more than it had invested to build and maintain  its pipelines and the companies  that ran them, leaving the impression that the sales were an unqualified  boon for Chesapeake.  But a look at an SEC filing by Access  Midstream  tells a different story: Chesapeake  was going to have to give much of that money back.

On the same day as the last of the major sales, Chesapeake  signed  long-term  contracts  pledging to pay Access  a minimum  fee for transporting  its gas. In some cases, the fee held no matter what happened  to the price of gas, or even how little of it flowed out of Chesapeake's  wells.  Chesapeake  also promised to connect every  new well it drilled to Access's  lines for the next 15 years in Ohio's  Utica Shale, a potentially  lucrative emerging  drilling field, and made similar agreements  elsewhere.

According  to ProPublica  projections  based on figures disclosed  by the companies  in late 2013, Chesapeake's commitments  would  have it paying Access a whopping  $800 million each year. Over ten years, the contracts  would generate  nearly twice as much money as Access  had paid Chesapeake  for its businesses  in the first place.

In plain words,  Chesapeake  and a company  made up of its old subsidiaries  were passing money back-and-forth between each other, in a deal that added little productive  capacity  but allowed  both sides of the transaction  to rake in billions of dollars.

Access'  chief executive,  J. Mike Stice, told a group of investment  banking  analysts  last September that the deals amounted  to a "low-risk  business  model" that "most people  haven't understood.""Nobody  really has the access to contractual  growth that [Access  Midstream}  has," Stice said."lt doesn't  get any better than this:

The SEC filings provide  other detail about the ways that the two companies  devised to remain inextricably  linked, even though  Chesapeake  has sold the stake it once had in Access.

At the same time it signed  its contracts,  Access  pledged to subcontract  a slice of its business  back -  again -  to companies  still owned by Chesapeake.  It also agreed to buy industrial  equipment  used to compress  the gas for the pipelines  from a company  owned  by Chesapeake.  In essence,  Chesapeake  would get a rebate on the fees it had guaranteed  to Access.  Chesapeake  never answered  questions  about whether  that rebate was figured  in to the price it charged  Joe Drake and his neighbors.

In its royalty statements  to Joe Drake, Chesapeake  says the expenses  it had deducted  reflect what  it costs the company  to move his gas. The company  has said in public statements  about the royalty disagreements  in Pennsylvania  that it is merely  recouping  its costs. But ProPublica's  projections  drawn from figures  previously  reported  by both companies  show that Chesapeake  could earn back billions of dollars of the transportation  fees it is paying Access over the next 10 years.

There are other ties between the two companies.  Access's  Chief Executive,  Stice, once worked for McClendon  as the chief operating  officer of one of the companies  that used to run the pipelines.  Chesapeake's  chief financial  officer, Dominic del Osso, sits on the board of Access  Midstream  Partners,  and as of 2011, according to SEC records, owned thousands  of shares  of Access  stock.

The relationships  raise questions  about Chesapeake's  assertions  that its contracts  are arm's-length  agreements,  and that its expenses  reflect its true cost of operating.  "They had a lot of disguised  debt,'  said Philip Weiss, a chief investment  analyst with Baltimore  Washington  Financial Advisors,  who has covered Chesapeake  over the years, and was often concerned  that the company  has understated its financial  obligations.  In this case, he said, Chesapeake's  expensive  contracts with Access  might not just be the cost of operating,  but another unusual  long-term  financial  obligation  that would weigh down the company,  but which  . wouldn't  be reflected  in the normal measures  of debt. "The use of off-balance-sheet  debt is often a way to try to avoid getting as much investor  scrutiny:

For six months  Chesapeake  declined to answer questions  about these discrepancies  posed by ProPublica.  But in its latest annual financial  filings  made public just two weeks ago, Chesapeake  noted for the first time that it had $36 billion worth  of what it called "off-balance-sheet   arrangements,"  including  $17 billion of long-term  commitments  to buy gathering  services. This appears to be the first time the company  has acknowledged  that it owes more money than what has been identified  as debts in previous SEC filings.

In the filings, Chesapeake  said that the $17 billion figure didn't include reimbursement  from royalty owners,  and that landowners  and corporate  partners  alike "where appropriate,  will be responsible  for their proportionate  share of these costs."

 
In an earlier, September  2013 quarterly  filing, there were hints of the same activity,  but with no disclosure  of the salient details to shareholders  that might help them understand  what was really going on. Chesapeake  reported that its expenses  related to its pipeline and marketing  business  roughly doubled  in the months after it sold its pipelines, compared  to the same period a year earlier, and that its revenues for that part of its business  also increased accordingly,  covering the new costs. Chesapeake  told investors  it had cost the company  more than $8 to transport  a cubic foot of gas or its oil equivalent  -  an astronomical  amount  unheard of in the energy  industry.

•Something  is wrong with this calculation,"  said Fadel Gheit, a seasoned  industry analyst for the investment  firm Oppenheimer,  who estimated  the figure was off by a decimal  point before  later confirming  that it matched  the numbers  Chesapeake  had reported to the SEC. "It can't be."

In fact, none of the financial  analysts who cover Chesapeake  that ProPublica  spoke with could explain the explosion in Chesapeake's  marketing  and transportation   revenues  and expenses  using oil sales alone.

"The change  in marketing,  gathering,  compression  revenue and expense  is staggering,•  wrote Kevin Kaiser, a financial  analyst with Hedgeye,  a private equity group in New York, in an email to ProPublica.

Neither Chesapeake's  investor  relations group,  nor its media staff would comment  on whether the deals amounted  to disguised  debt that landowners  would repay. In interviews,  one former Chesapeake  employee  with knowledge  of the company's  operations  dismissed  the notion that Chesapeake  was essentially  paying back an off-balance-sheet   loan by paying unusually  high fees for use of the pipelines.

"The timing supports  that -   that Chesapeake  got paid a lot of money and the gathering fees get paid back over time, and it looks like a loan arrangement:   said the former employee.  "But to jump to the conclusion  that the whole thing is a sham and a means  by which they are going to defraud  royalty owners is not true.•

Only in its latest filing at the end of February,  after months of queries from ProPublica,  did Chesapeake  add a note­ two sentences  in 299 pages -  stating that its contracts  with Access and other companies  played into the rising figures.  But the company  did not specify how much.

And to the extent that the real costs of gathering  and transporting  gas can be gleaned from securities  reports and Joe Drake's own statements,  there's still a big gap between what Chesapeake  reports  it paid out, and what Access reports it received for gathering  services.

In the mean time, one thing is for sure: all the escalating  costs, side deals, and unexplained  debt aside, Access  is making more money than ever, while Chesapeake  -  so recently fighting to stay alive -  has emerged  from its troubles and is turning  a profit.

Joe Drake, on the other hand, is almost  back to where he began.

He recently cancelled  a fishing trip to Canada  and doubled  back on the question  of how to make a living from the farm. With  his livestock gone he will now focus on growing  and bundling  hay, which  he will sell to other farms so they can feed their animals.  The natural gas boom has become  little more than a sideshow.

"We are surviving,"  he said. "But we learned that a good old handshake  don't cut it anymore."