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Chesapeake settles with Pennsylvania landowners in royalty lawsuit

Chesapeake Energy Corporation's 50 acre campus is seen in Oklahoma City, Oklahoma, April 17, 2012. REUTERS/Steve Sisney
Chesapeake Energy Corporation's 50 acre campus is seen in Oklahoma City, Oklahoma, April 17, 2012. REUTERS/Steve Sisney

(Reuters) - Chesapeake Energy Corp has agreed to pay $7.5 million to settle a class-action lawsuit with Pennsylvania landowners who said the natural gas producer was deducting large fees from their royalty checks.

Chesapeake, the largest natural gas operator in the state, settled the lawsuit within hours of its filing with the U.S. District Court for the Middle District of Pennsylvania on August 30. On Wednesday, Chesapeake's lawyer submitted the proposed wording of a court order that would approve the settlement, which is expected by the end of the year.

Reuters reported on August 28 that Chesapeake started this year to take much heavier deductions from royalty checks it sends Pennsylvania landowners to help pay to gather, compress, market and transport natural gas, in most cases cutting compensation by more than half.

Chesapeake and its peers send royalty checks to landowners, typically monthly, for the natural gas they extract.

The settlement involves a complex formula to reimburse plaintiffs who had so-called market enhancement clauses in their leases. It will bar Chesapeake from deducting certain percentages of fees from plaintiffs' royalty checks in the future.

A Chesapeake representative was not available to comment.

The case is Demchak Partners Limited Partnership et al vs. Chesapeake Appalachia LLC, U.S. District Court for the Middle District of Pennsylvania, No. 3:13-cv-02289-MEM.

(Reporting by Ernest Scheyder in New York; editing by Matthew Lewis)

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