Gas drillers pledge their leases at banks to borrow the money to drill wells and pay contractors. When they can’t pay, the bank forecloses on the loan and the contractor’s file mechanics liens against the encumbered asset. “The encumbered asset” is legal talk for “your farm,” as many hapless folks are finding out. A mechanics liens from a contractor would certainly go against the leased mineral rights, and if the lease contained surface access (which it would have to) then, conceivably they could get a judgment against the land owner. Regardless, if the lien is legitimate it will cloud the title – so if the landowner goes to sell or refinance, they may have to pay off the contractor just to get rid of the mechanic’s lien. Anyone that is Compulsively Integrated into a well could face such an encumbrance. Plus the encumbrance of the banks that these leases have been pledged to en masse to drill the wells. Those can find their way back to the individual leases, since that was the collateral in the driller’s loan: Somebody’s farm. A lot of farms.
Hundreds of such liens have been filed in Bradford County, Pa. alone. Which the landowners now have to clean up by paying off the contractors. Or, as John Trallo explains, risk losing the property to Chesapeake, who can buy the debt cheap, then foreclose on the property:
Chesapeake has also used this tactic to acquire large commercial properties such as: quarries, large farm parcels, etc., in PA. Once the lien is filed by the contractor, Chesapeake then buys the debt in the eleventh hour and then forecloses on the property.
Then, of course, you have to get the lease removed from your title – it just doesn’t self-extinguish from the records. How Tequila A Dead Gas Lease:
Interviews with attorneys for contractors in Texas, New York and Pennsylvania, and a review of county court records, show Chesapeake fell behind on a variety of bills this year. Those affected extend beyond the contractors, too:
* On Nov. 2, a New Jersey construction and drilling company filed a lien against property leased by Chesapeake in Bradford County, Pa. The company, Carson & Roberts, says Chesapeake owes it $859,000.
* On Dec. 7, two New York contractors also filed liens in Bradford County. They say they are owed $1.8 million for work on a natural gas compression station there.
* And on Dec. 20, a Minnesota drilling contractor filed three liens on properties leased by Chesapeake in Bradford County. The company claims it is owed more than $725,000.
Chesapeake may have transferred the debts owed to contractors, but the company is still listed as the debtor in the non-payment suits. And the liens filed for non-payment show up as claims against land owners with whom Chesapeake cut deals. Such liens could interfere with an owner’s ability to sell the property, said Stanley B. Edelstein, a Philadelphia construction law attorney. “Depending on the language in a mortgage, it could be an act of default,” he said.
Bradley Sink and his wife, Beatrice, own the land where construction company Carson & Roberts filed its lien against Chesapeake. Sink, a retired farm equipment dealer, did not know the lien had been filed until he was contacted by a reporter.“I’m not real thrilled with having a lien on the property,” said Sink, who referred the issue to his attorney.
Chesapeake declined to comment on the liens when asked by Reuters.