Chesapeake Gas actions puzzle

By Dan Hust

SULLIVAN COUNTY — Dozens, perhaps hundreds, of Pennsylvania landowners have received letters saying Chesapeake Appalachia’s natural gas offers are being pulled off the table.
Meanwhile, the company continues to pursue leasing in New York State, making observers question the validity of those letters.
“I think it’s a ploy,” affirmed Ramsay Adams, executive director of Catskill Mountainkeeper in Youngsville. “... That’s a tactic that has been used out west all the time.”
However, he did acknowledge that Pennsylvania “has tightened its regulations, whereas New York hasn’t.”
Noel van Swol of Long Eddy is the co-founder of the Sullivan-Delaware Property Owners Association, representing more than 62,000 acres being negotiated for gas leases. He pointed out that Chesapeake CEO Aubrey McClendon has recently been featured in national TV advertisements promoting natural gas, with a map showing the Marcellus Shale play right behind him.
“Chesapeake and Cabot [another gas company] have periodically threatened to pull out of the region and haven’t done so,” said van Swol. “... It is quite obvious that no one is going anywhere.”
Both Sullivan-Delaware and the Northern Wayne Property Owners Alliance continue to negotiate for thousands of acres in their respective states, though whether or not that includes Chesapeake is a closely guarded secret.
The letter sent out to Pennsylvania property owners at the beginning of the month is not actually from Chesapeake itself. Instead, Myrna Coleman – identified as the project manager with the Long Consulting Group in Olean – writes on Chesapeake’s behalf in regard to “bonus offer on oil and gas ownership in Pennsylvania.”
“This letter is being sent to inform you that Chesapeake Appalachia, LLC and agent Long Consulting Group, LLC (‘Chesapeake’) hereby revokes and rescinds any and all prior offers,” she writes.
“Chesapeake is refocusing its oil and gas efforts and is scaling back its leasing efforts. This re-focusing is due to regulatory issues and current economic factors.”
The letter welcomes calls with questions, but when contacted this week, Coleman referred questions to Chesapeake itself.
Chesapeake Director of Corporate Development Matt Sheppard told the Democrat that “Chesapeake Energy has invested heavily in the Marcellus Shale play during the past 18 months, and we believe our investment has provided us with a very healthy leasehold on which we can conduct future natural gas operations. Therefore, we now have a strategic leasing program to enhance our current leasehold.
“As we work with the regulatory agencies to achieve clarity on the many issues associated with exploration and production,” Sheppard added, “we will begin a comprehensive program that brings more clean-burning natural gas into the market from Pennsylvania and the surrounding states.”
Media reports strongly indicate Chesapeake may be looking to sell its holdings in the Marcellus Shale play to one of a number of global companies, but definitive answers are hard to pin down.
One Wayne County, Pa. resident who called the Long Consulting Group said he was told the company is transitioning from land acquisition to drilling in the area.
Across the Delaware River, however, Chesapeake reportedly continues seeking leases in the area. Van Swol said that on September 12, a property owner near Long Eddy was offered $2,750 an acre with a 15 percent royalty. Neighbors of the man, added van Swol, had already signed leases for tiny one-acre properties close to the Millennium Pipeline.
Sources close to ongoing negotiations in Pennsylvania said this could be the result of Chesapeake’s efforts to sign up individual landowners rather than groups, with company representatives allegedly telling group members that the terms of an individual lease will match the terms of the group lease.
When the property owners’ groups protested such actions, Chesapeake allegedly responded with this letter, which van Swol felt was designed not just to soften up property owners but to get those landholders to push municipal officials to go easy with regulating gas companies’ activities.
“It is obvious that Chesapeake is using pressure tactics… in order to get concessions out of local governments and the state legislature in Pennsylvania,” van Swol claimed.
Wayne County, Pa. resident Michael Uretsky, a member of the Northern Wayne Property Owners Alliance, got one of the letters.
He commented on it not as a spokesperson for the group but as a longtime professor of business at New York University, with years spent in both management education and international negotiations projects.
“The old adage that ‘it's not over until the… sings’ is still true,” he remarked. “There is still a land-paper game going on. Capture whatever you can.
“Notice that I am not saying anything about extraction. The exploration companies make money by selling leases and by using them to commoditize public and private financing deals – not unlike the process that the banks followed with home mortgages.”
As for the letter, “the regulatory point is fluff,” Uretsky said. “While there is admittedly some chaos in the regulatory organizations – generally caused by the fact that events overtook planning – this chaos is being eliminated and an orderly process is evolving. Some bumps along the way, but that is to be expected in a situation of this kind.
“I cannot believe that any of the energy companies would be unaware of this forward progress,” he concluded. “The bottom line is that the most likely objective is to use these statements as part of a negotiations/ landgrab strategy.”