ProPublica, a not-for-profit news organization, has posted a lengthy report that it says details how Chesapeake Energy systematically overcharges royalty owners for post-production expenses -- a hot topic around the country -- and then recoups some of the money. A link to the report is here.
ProPublica's report is a bit different than other reports of royalty disputes. Those generally revolve around whether the producer has the right to deduct post-production expenses -- the costs of gathering, treating and moving gas to a pipeline. The Star-Telegram has published several, the latest of which is here, and there are some related reports here with links to yet more reports.
What's new is that ProPublica says Chesapeake made a deal with Access Midstream that greatly inflated those costs, which the producer can then subtract from royalty checks, and then allowed Chesapeake to share some of that money. Access Midstream was created as Chesapeake spun off its midstream assets -- gathering lines and gas processing plants. (Spin-offs of midstream operations are common. Devon Energy just completed a big one, the announcement of which was reported here.) Whether Chesapeake's was done with the intent of defrauding royalty owners is what would make its deal compelling reading.
-- Jim Fuquay