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Drilling firm wants money back for Donora claims

| Friday, Nov. 5, 2010

DONORA — When Tom Kostolansky signed over gas drilling rights under his property to Chesapeake Appalachia LLC, he didn't think he would get rich from the deal.

But the Donora lawyer didn't think he'd have to give back royalty checks, either.

But that's exactly what's being asked of Kostolansky and other residents in a 595-acre tract of land that includes part of the borough and neighboring Carroll Township.

About a week ago, Kostolansky — a Donora councilman — received a letter from Chesapeake, asking that he send back two royalty checks he and his wife had received this year as a result of the Marcellus Shale gas drilling agreement.

Kostolansky is not only balking at sending back the approximate $220, he's planning to initiate a class-action law suit against the company.

"I don't think it's right and I'm not sure it's legal," said Kostolansky. "My plans are to file the class-action lawsuit and make the company prove to people who received those dividends that they are not entitled to them."

Chesapeake, through spokesperson Stacey Brodak, offered a brief response on the issue.

"Chesapeake Appalachia," she said in an e-mail, "has communicated with its royalty owners regarding this matter. We reserve further public comment at this time."

The letters Kostolansky and other residents in what Chesapeake Appalachia termed the "Pine Oaks Unit" received claimed that the company had originally planned to "drill the wellbores under the town of Donora; however, due to mechanical difficulty, the wells were drilled shorter than anticipated lateral lengths."

As a result, according to the letters, Chesapeake was not able to include the lease in the Pine Oaks Unit and the checks already mailed to people need to be returned.

The letter included a self-addressed, stamped envelope and a message that the dividends need to be returned by Dec. 31.

Kostolansky, who lives in Donora's Place Plan section, said he has received calls from some of his neighbors wondering what he's going to do about Chesapeake's request.

"The contract (signed between residents and Chesapeake) calls for the payment of royalties based on gas harvested," Kostolansky said. "I can't believe that Chesapeake would give out dividend checks twice and not be realizing a profit at the time.

"It makes no sense that you send out a check if you aren't making a profit."

Repeated attempts to get comment from Chesapeake Appalachia LLC for this story were fruitless.

Kostolansky estimated that he received his royalty checks in February and again in September of his year.

He said he doesn't think any company would send out checks based on an estimate of what profit they expect to make.

He hasn't talked to anyone from the company and said he is encouraging anyone else who is being asked to send back the checks to join in the legal action.

"I would assume that many of the people in the Pine Oaks unit have received checks similar to the amounts that I did. But some people who own much larger pieces of land probably got much more substantial amounts of money," he said.

Anyone wishing to learn more about the class-action suit is asked to contact Kostolansky's law office at (724) 379-6336.

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