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Feds Look Deeper Into Chesapeake Energy’s Accounting Practices

Sue Ogrocki


Chesapeake Energy, which is facing a royalty owners revolt here in Pennsylvania, will have to share more details of their accounting practices with the U.S. Department of Justice. The company revealed in a recent filing with the U.S. Securities and Exchange Commission that the Justice Department has subpoenaed records on the gas driller’s accounting methods for “the acquisition and classification of oil and gas properties and related matters.”

The Justice Department has been investigating the company for anti-trust violations. Chesapeake is also facing lawsuits from royalty owners claiming underpayment in Pennsylvania, Ohio, Texas, Arkansas, Louisiana and Oklahoma. Pennsylvania royalty owners are pushing for legislation that would clarify language in a state law requiring at least 12.5 percent royalties.

Depending on the language of a lease contract, drillers and landowners may share post-production costs. These are expenses incurred when gas is processed and transported to market through pipelines. But people allege some companies charge exorbitant, and possibly fraudulent post-production costs, leaving them with little to no royalty money in some instances.

In the filing posted on Chesapeake’s website last Thursday, the company says it is working with the Justice Department, the U.S. Postal Service and state agencies, and plans to respond to the subpoenas. A company spokesman says he had no further comment.

Find more of this report and others on the site of our partner, StateImpact Pennsylvania