Chesapeake Files Kahle Counterclaim

WHEELING – Attorneys for Chesapeake Energy say the company has the right to drill on Ohio County property owner Melvin Kahle’s land – and have filed a counterclaim against him to achieve their goal.

Kahle, however, denies this, noting Range Resources released him from a lease for his 180 acres of property along Chapel Hill Road near Triadelphia before trading his lease to Chesapeake.

The matter of Kahle versus Chesapeake has been moved from Ohio County Circuit Court to federal court, as Chesapeake attorneys Kevin Abbott and Nicolle Bagnell have filed a counterclaim against Kahle, asserting that his interference with the company’s plans to drill on his land will cause Chesapeake “irreparable harm and money damages if the well cannot be drilled on schedule or at all.”

With the case moving to the Wheeling Division of the Northern District of West Virginia – in which Kahle once served as U.S. Attorney – Kahle maintains Chesapeake has no right to act on his property, despite Chesapeake having a valid permit from the West Virginia Department of Environmental Protection to drill wells on his land.

“I do not believe (Range Resources) had a right to assign my lease to Chesapeake,” he said.

Records show Kahle’s lease was one of 156 throughout Ohio County that Range assigned to Chesapeake by an agreement made between the companies on Aug. 16. The assignments read they are retroactively “dated effective as of July 1, 2010,” even though the agreement was not made until Aug. 16. Furthermore, these papers were not recorded in the County Clerk’s office until Nov. 8-10.

Kahle then received a letter from Range dated Aug. 20, which is four days after Range and Chesapeake state that they agreed to the assignment. The letter reads, in part, “Enclosed are the original oil and gas lease documents that were presented to you on April 27, 2010. … This letter also confirms that there are no contractual or legal obligations … and you may pursue other lease offers with other gas producers as you please.”

Kahle believes this means he is no longer under contract with Range, so the company then has no authority to assign his lease to anyone else.

However, Abbott and Bagnell maintain the letter was not meant to release Kahle from the lease he signed with Great Lakes Energy Partners in May 2006. This company later became part of Range.

Rather, the Chesapeake attorneys say the letter from Range to Kahle was meant to release Kahle from a later agreement that Range offered to Kahle on April 27, 2010, so the original lease should remain in effect.

“That is one of the key elements to the case,” Kahle said, declining to comment further about the the second agreement.

This later agreement is known in the gas industry as a “top lease.”

These later contracts only take effect if the original leases expire. Tim Greene, owner of Land and Mineral Management of Appalachia, said these top leases are becoming more common in northern West Virginia.

“A top lease is, basically, if you have 100 acres leased for a certain length of time, and then are offered another lease for the same acreage. The new lease only applies if the current lease expires,” Greene said.

In their counterclaim against Kahle, Chesapeake’s attorneys note they want the federal court to find that the lease Kahle signed with Range on May 15, 2006 is valid and in effect, and that Chesapeake may proceed to drill on the land.

“The May 25, 2006 lease granted Range the exclusive right to explore for or produce oil and gas from the Kahle’s property for a primary term of five years (until May 25, 2011) and for so long thereafter as oil or gas are produced in paying quantities …”, their filing states.

Moreover, Abbott and Bagnell have sought to remove Chesapeake Energy and Senior Field Representative Kevin Swiger from the lawsuit.

The litigation is now technically between Kahle and Chesapeake Appalachia, as well as that company’s partner, Statoil USA Onshore Properties Inc. Despite this, Chesapeake Appalachia is a subsidiary of Oklahoma City-based Chesapeake Energy.