BETHANY, W.Va. — Two brothers are continuing a federal lawsuit against Chesapeake Appalachia LLC, claiming it is dragging its feet on picking a third arbitrator to preside over the case involving discrepancies over royalties.

Scott and Mark Sonda filed a motion to compel arbitration over a lease Chesapeake is claiming to hold in effect on the land the brothers jointly own. The motion was filed Dec. 9 in the United States District Court of the Northern District of West Virginia.

The Sondas own a total of 480 acres in Brooke County. They originally leased 341 acres to Great Lakes Resources. The lease was then sold to Range Resources and eventually Chesapeake. The lease was set to expire on the land in May 2011 if a well wasn’t drilled on the property or a portion of the property. The remaining 139 acres is not leased.

A well was drilled but contained only a small number of acres of their land, which kept the land under the terms of the Chesapeake lease. That well is receiving no royalties.

The land they have leased is divided among five units with most receiving no royalty payments.

Currently, the Sondas have four acres in one producing unit and 40 acres in another unit.

The beginning

The Sondas filed a lawsuit in May in Brooke County, W.Va., civil court in May 2012 alleging their lease had expired and that Chesapeake’s oil and gas operations were trespassing on their property.

Chesapeake Appalachia moved the civil lawsuit to the federal court in July 2012.

Chesapeake then filed a motion to force arbitration in the case based on the Sonda’s lease.

“Any controversy or claim arising out of or relating to this lease, or breach thereof, shall be ascertained and settled by three disinterested arbitrators in accordance with the rules of the American Arbitration Association…”

The court granted the motion.

Arbitration proceedings

In February 2013, the Sondas began arbitration proceedings. Two arbitrators have been selected; however, both sides have been unable to agree on the selection of the third arbitrator so the case remained in limbo.

The Sondas claim the only arbitrators Chesapeake Appalachia will agree upon are arbitrators from Texas or Oklahoma where the laws are decidedly for the gas companies.

Meanwhile, Chesapeake continues to remove gas from under their property with three horizontal Marcellus shale wells.

In October 2012, Chesapeake was notified that the Sondas were terminating their lease because of violations of the lease which included drilling more than one well in the Thelma Hayes North Unit.

The lease attached states that no more than one well per spacing unit and royalty is to be paid according to the fractional interest the leases premises contributes to the unit.

Lease violation

Scott Sonda said the company has also unitized the property with five other wells that are not draining gas, which appears to be a violation of the lease in question, according to the attached lease in the court filing.

The Sondas claim they had the right to terminate the lease after providing the gas company 60 days noticed to correct their violation. The Sonda’s claim Chesapeake never corrected the violation and the lease could be terminated.

Jump to October 2013, the Sondas filed for injunctive relief. They requested the court enter an order requiring Chesapeake Appalachia to pay the royalties due and owing the brothers under the lease agreement.

An option was given that Chesapeake was asked to put the royalties owed and productions from the wells in question into escrow until the arbitration concluded.

Royalties

Scott Sonda also said that Chesapeake has sent a few checks to the brothers amounting to less than $10,000 (which have not been cashed), while the Sondas believe that Chesapeake should have sent in excess of $250,000 in royalties that are due, according to the lease terms.

The royalty checks they have received have been for the four acres they have in the one unit. They have not received royalty checks for the 40 acres contained in the other unit.

The Sondas claim that they were entitled to 14 percent of the proceeds from the wells regardless of the arbitration proceedings outcome.

Court order

In the court documents, the Sondas also requested a court order allowing them access on the well sites to verify the amount of oil and gas production at the meters of the wells. The request was made due to discrepancies in the oil production volume shown for the Thelma Hayes 3H well between the Sonda’s royalty statements they have received and that of their neighbor.

In the Dec. 9 round of legal wrangling, the Sonda’s made a request for injunctive relief stopping Chesapeake from producing the wells in question. The Sonda’s also requested that they be allowed to read the various well meters if the judge decides not to stop the production.

No comment

Chesapeake Exploration declined comment when contacted by Farm and Dairy.

Another court date has not been set for the matter.