PA Supreme Court Rules Against AG in Natural Gas Leasing and Royalty Case

The Pennsylvania Supreme Court has ruled in favor of two natural gas drilling companies, finding that the attorney general cannot use state consumer protection law to challenge their mineral rights leasing activities.

The case began in 2015, when Attorney General Josh Shapiro sued both Anadarko Petroleum Corp. and Chesapeake Energy Corp. for violating the Pennsylvania Unfair Trade Practices and Consumer Protection Law (UTPCPL). In a post on his website published a year ago, Shapiro stated that “Chesapeake and Anadarko will pay”, and that he will work to get landowners “what is owed to them”.

AG Shapiro argued before the Court that both companies had engaged in unethical and illegal business practices in various stages of their business operations. These behaviors include using deceptive and predatory practices when negotiating leasing and royalty contracts with landowners in northern Pennsylvania. Additionally, the companies were accused of colluding to eliminate competition between them by dividing business territories within the state in mutually advantageous ways.

Shapiro further argued that these practices violated the UTPCPL, which entitled landowners to sue Anadarko and Chesapeake, to which the lower court agreed. Upon appeal to the state Supreme Court, the companies argued that though the UTPCPL does grant buyers the right to sue, in this transaction the firms were the buyers with landowners were sellers. It was Anadarko and Chesapeake that were purchasing the lease and royalty agreements from the landowners, and with this distinction, the landowners would not be granted the right to sue under the law, thus nullifying the case. The state Supreme Court agreed with this distinction in a 6-1 decision, overturning the lower court’s decision.

The ruling applies only to Andarko, after the attorney general’s office recently reached a settlement with Chesapeake following its bankruptcy restructuring to pay $5.3 million to landowners.

In a statement regarding the case, AG Shapiro stated that he would work with lawmakers “to update Pennsylvania’s laws to better protect those misled by corporations”.

As always, it is imperative for those entering into legal agreements to consult with appropriate legal professionals before signing any documentation. For landowners specifically, there are several landowner advocacy groups within Pennsylvania that work to assist landowners throughout the process.