Energy CEO Praises Land/Lease Flipping Over Producing Gas; Leases Can Gut Homeowner's Rights
DeSmogBlog has obtained a copy of a sample hydraulic fracturing (“fracking”) lease distributed to Ohio landowners by embattled former CEO and founder of Chesapeake Energy, Aubrey McClendon, now CEO of American Energy Partners. Elisabeth Radow, a New York-based attorney who examined a copy of the lease, told DeSmogBlog she believes the lease “has the effect of granting American Energy Partners the right to use the surface and subsurface to such a great extent that it takes away substantially all of the rights attributable to homeownership.”
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Radow pointed out two big differences between the December 2009 Chesapeake lease and the June 2014 American Energy Partners lease. “One significant addition to this lease involves the right to suspend payment of royalties to a property owner with a prior mortgage until a subordination of mortgage is delivered in a form acceptable to American Energy obtained at the cost of the property owner,” Radow told DeSmogBlog via email.
“Educated mortgage lenders are well aware of the risks to their mortgage collateral associated with hydraulic fracturing and will be unlikely to subordinate their interests to the gas company. If they do refuse to deliver a subordination agreement, this clause gives the gas company a free pass on drilling a mortgaged property without paying royalties.” The other main addition to the June 2014 version: it permits injection of “hydrocarbon related substances from any source” on a homeowner’s property for payment of just $1,000.00 per year,* proportionately reduced to the homeowner’s interest in the estate (“estate” is likely intended to mean the homeowner’s proportionate interest in the spacing unit).
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McClendon has also publicly stated that flipping land is more profitable than selling gas. “I can assure you that buying leases for x and selling them for 5x or 10x is a lot more profitable than trying to produce gas at $5 or $6 per million cubic feet,” he once said on an investor call. An Exhibit found within court records from the Murray v. McClendon case shows American Energy Partners has posted newspaper advertisements reading “We are drillers, not land flippers!,” likely an attempt to differentiate the new start-up company from the past deeds of Chesapeake Energy.
Yet, the content of the American Energy Partners lease served to Murray Energy, the company's current on-the-ground activity nationwide and McClendon’s Cheasapeake Energy “land grab” track-record tells another story: that of another land grab well in the making.
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http://www.desmogblog.com/2014/10/16/court-files-robert-murray-lease-aubrey-mcclendon-new-fracking-company