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Dickinson couple sue Chesapeake Energy for mineral rights payments

Amid news that it sold nearly $7 billion of petroleum-producing land and pipelines, oil and gas giant Chesapeake Energy continued to wait Friday for a decision on a motion for dismissal it filed in a lawsuit involving a Dickinson couple.

In a case that has been moved from Stark County Court to U.S. District Court in Bismarck, Jeffrey and Barbara Kuhn allege they are due payments totaling $319,686 from Chesapeake in relation to mineral rights lease agreements signed in 2011 in Hettinger and Stark counties.

Earlier this year, Chesapeake uprooted its drilling operations and moved two rigs that were stationed south of Dickinson. Chesapeake acknowledged the lease agreements with the Kuhns, but is arguing that it operated within its rights when it left, leaving what the plaintiffs argue were unpaid promised bonuses.

Chesapeake put in a request -- which was granted -- to move the proceedings to federal court in Bismarck in July and has since filed a motion to dismiss, according to court records.

Charles Peterson of Mackoff Kellogg, a Dickinson firm representing the plaintiffs, said Chesapeake has engaged in a pattern of refusing to pay up on signed mineral rights leases.

"We have eight cases right now against Chesapeake Energy and it's a company that has failed to live up to lease agreements around the country," Peterson said. "For whatever reason, sometimes large corporations believe they have a better chance of winning at a higher level and I think that's why they wanted it moved from Stark County."

The Kuhns entered into an agreement with Chesapeake for more than 400 acres in both counties. The Kuhns are suing on the grounds of breach of contract, fraud, civil conspiracy and three other counts. A hearing has not yet been scheduled.

The Kuhns entered into the two lease agreements by way of Chesapeake Exploration, a Chesapeake Energy subsidiary, and negotiation pointman Jeffrey Spears of Sullivan Land Resources Inc., a middleman company named in the lawsuit. The deals were signed in October of 2011, months before Chesapeake announced it was leaving the Dickinson area.

On Wednesday, the Oklahoma-based company sold $6.9 billion of oil and gas field properties and infrastructure in a series of deals designed to help pay off a chunk of the company's long-term debt, according to a Chesapeake media release.

Chesapeake spokesperson Jim Gipson said in an email that the company "does not comment on matters in litigation." Not a stranger to lawsuits involving the public, Chesapeake settled a case with Pennsylvania residents who said their drinking water was contaminated due to the company's drilling practices.

Chesapeake currently faces multiple mineral-rights lawsuits in several states. The Fort Worth Star-Telegram reported this week that Chesapeake lost a nearly $20 million lawsuit involving a Texas mineral-rights lease.

Chesapeake empathizes with the Kuhns, even going so far as to state that the couple's "unhappiness is understandable," but asserts that the landowners knew the company had the right to walk away from the lease, according to a court memorandum.

Bryan Horwath
A Wisconsin native, Horwath has been covering news in the Oil Patch of North Dakota since 2012. Horwath currently serves as the senior agriculture and political reporter for The Dickinson Press and, despite the team's tendency to always let him down, remains a diehard Minnesota Vikings fan.
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