Chesapeake Energy Abandons 13,000 Acres Of Gas Drilling Leases In New York State

By Edward McAllister

NEW YORK, Sept 9 (Reuters) - Chesapeake Energy Corp has agreed to release more than 13,000 acres of land leased for oil and gas drilling in New York state as a ban on fracking extends into its sixth year, a statement from lawyers involved in the case confirmed on Monday.

The Oklahoma-based company agreed to terminate the leases in Tioga and Broome counties in the southern portion of the state, ending a two-year legal battle with over 200 landowners, according to law firm Levene Gouldin & Thompson, which represented landowners.

The impending deal was reported by Reuters last month.

Chesapeake had been appealing a federal court ruling in November that stated the company could not use a state ban on high volume hydraulic fracturing, known as fracking, as a reason to declare force majeure and extend leases beyond their expiry without offering landowners better terms.

Some landowners, who signed their leases during the last 13 years before a U.S. drilling boom boosted land prices in gas-rich areas like New York, had been calling for a release from the leases to seek more lucrative deals from other energy firms. Other landowners are now opposed to any drilling on their land altogether.

Chesapeake's decision to now drop the leases is a sign of energy firms' growing frustration over operating in the Empire State, where most drilling has been on hold since 2008. It is also an indication of how the Oklahoma-based company is reining in spending after years of aggressive acreage buying left it with towering debt.

Chesapeake did not immediately respond to a request for comment.

The 13,000 acres is a small portion of the 2.5 million acres the company holds in natural gas shale plays across the United States, according to company filings, but is a meaningful sum for New York where Chesapeake is one of the biggest leaseholders.

Chesapeake was one of the first energy companies to enter New York on a major scale, securing leases from hundreds of landowners, some for as little as $3 an acre, since 2000. It generally offered a 12.5 percent royalty payment from oil or gas produced on the land, a number of landowners have said.

But, in a frenzied land grab that accompanied the U.S. energy boom since 2007, landowners across the country have received thousands of dollars an acre, including just miles away in neighboring Pennsylvania.