By Ben Lefebvre
Chesapeake Energy Corp. (CHK) will have to renegotiate more than 4,400 land leases in New York and pay $250,000 as part of a settlement with the state, the New York attorney general's office disclosed Thursday.
The decision forces Chesapeake to allow other natural-gas producers to bid on certain leases Chesapeake holds that expire by Dec. 31, 2013. Chesapeake would then have to match the other bid price or give up the lease, according to the attorney general's office.
The settlement stemmed from Chesapeake's previous attempts to hold on to leases past the original dates agreed to by landowners without renegotiating terms. Chesapeake argued that it could hold the leases until New York state's Department of Environmental Conservation completed a review on the effects of hydraulic fracturing, or fracking.
Some environmental groups have contended that the chemicals used in fracking could leak into groundwater supplies. Chesapeake hasn't drilled on the land while the DEC worked on its review.
The decision should have little effect on Chesapeake's earnings, analysts said.
"Chesapeake was not drilling there, and I doubt they'd renew many of those leases," Jefferies & Co. analyst Biju Perincheril said.
The Oklahoma City-based producer has been trying to limit its exposure to natural gas, prices of which have plummeted because of a wave of production. Natural gas traded at $2.425 a million British thermal units Thursday, up from a decade low of $1.90 in April.
A Chesapeake spokesman wasn't immediately available.
The agreement with New York's attorney general also requires Chesapeake to pay the state $250,000 as reimbursement for costs of the investigation.
Write to Ben Lefebvre at firstname.lastname@example.org.
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