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By Paul R. Yagelski, Esquire
Rothman Gordon
Pittsburgh, Pennsylvania

In Commonwealth v. Chesapeake Energy Corp., No. 81 MAP 2019, 2021 Pa. LEXIS 1205 (Pa. March 24, 2021), the Pennsylvania Supreme Court held that the claims of the Pennsylvania Attorney General (“OAG”) under Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (“UTPCPL”) were not cognizable. Because the oil and gas companies, Anadarko Petroleum Corporation and Anadarko E&P Onshore, L.L.C. (collectively “Anadarko”), were not in the position of a seller for purposes of the UTPCPL, the UTPCPL did not apply.

Anadarko conducted natural gas exploration and production in the Marcellus Shale formation in northeastern Pennsylvania. To acquire oil and gas interests, Anadarko imported or contracted with “landmen” who in turn negotiated and entered into leases with Pennsylvania landowners to obtain their properties’ mineral estates.

In 2006, Anadarko entered into a joint venture with other companies engaged in natural gas exploration and production in the Marcellus Shale formation; specifically, Chesapeake Energy Corporation, Chesapeake Appalachia, L.L.C., Chesapeake Operating, L.L.C., and Chesapeake Energy Marketing, L.L.C. (collectively “Chesapeake”). This joint venture included an oral market allocation agreement whereby Anadarko and Chesapeake allocated the territories in which they acquired oil and gas leases amongst themselves. Additionally, each company had the option of partnering on the leases secured by the other company. Anadarko’s landmen did not disclose these agreements with Chesapeake to prospective lessors. The alleged effect of the Anadarko-Chesapeake joint venture was to eliminate competition in negotiation of lease terms, including the signing bonus and royalty amounts provided in such transactions to landowners.

The OAG, acting as (parens patriae)[1], filed suit against Anadarko and Chesapeake[2] under the UTPCPL to restrain unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce declared unlawful by Section 3 of the UTPCPL. The OAG sought to recover for Pennsylvania landowners money wrongfully deducted from royalty checks as a result of the wrongful conduct of Defendants. Specifically, in its second and third counts against Anadarko (Counts IV and VI), the OAG alleged that Anadarko’s conduct in the joint venture and in its individual capacity was unlawful under UTPCPL Section 3 because it constituted unfair or deceptive acts or practices within the meaning of Section 2(4) of the UTPCPL, including subsections 2(4)(ii), (v), (vii), and (xxi).

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