State Regulators Take Aim at Chesapeake Energy

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In February, Pennsylvania Gov. Tom Corbett wrote an open letter to Chesapeake Energy Corp. (NYSE:CHK) CEO Doug Lawler, questioning and criticizing the firm for its failure to resolve complaints of unfair and possibly illegal deductions of post-production costs from natural gas production royalties owed to private landowners in the state.

“Despite communicating these concerns several times, I remain disappointed that the complaints of my constituents continue to go unheeded,” wrote Corbett. “It defies logic that, in some cases, leaseholders are being advised that they may actually owe money, rather than receive the fair and just royalty to which they are entitled.”

The letter was a big move bearing particular significance because Corbett, a Republican, is a longtime supporter of the natural gas industry and has received campaign contributions from Chesapeake. Natural gas is big, big business in Pennsylvania, which is the second-largest producer of the fuel in the union. Much of this production occurs on private land owned by residents and leased by energy companies like Chesapeake, Anadarko Petroleum Corp. (NYSE:APC), Mitsui E&P USA LLP, and Statoil ASA (NYSE:ASA).

“Development of natural gas has been a tremendous economic boon for the Commonwealth, particularly at a time when our nation continues to emerge from the economic recession,” Corbett wrote to Chesapeake. “We have worked hard, and collaboratively, in Pennsylvania that we develop this resource in a manner that protects our environment and natural resources, respects the rights of our citizens and communities, and allows us to maximize the economic and energy security potential of this great resource.”

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