CHESAPEAKE PLAYING HARD BALL AFTER $405 MIL ROYALTY SETTLEMENT

(02/02/2007)

Chesapeake Energy is playing hard-ball after a Roane County jury awarded $405 million against natural gas corporations in favor of royalty owners who claim they were cheated.

Scott Rotruck said "Chesapeake's decision about building our eastern headquarters (in Charleston) is on hold until we fully understand the ultimate result and ramifications of the jury verdict in Roane County on Saturday night."

A Roane jury found Columbia Natural Resources shortchanged the landowners by $134.3 million and said the company should pay $271 million more in punitive damages.

Chesapeake bought Columbia Natural Resources in 2005 for $2.2 billion.

In January 2006 Gov. Joe Manchin announced that Chesapeake would make Charleston its Eastern Division headquarters, and the company purchased 27 acres at NorthGate Business Park for the headquarters.

Rotruck said "Nobody could imagine an award so high, it's almost like capital punishment for a parking violation," but the royalty owners believe they have been scammed.

The company has about 400 employees in the Appalachian Basin, including about 300 in Charleston.

About 110 employees occupy all or parts of eight floors and a total of about 80,000 square feet in City Center West.