December 18, 2009
Fortuna Energy (“Fortuna”), an indirect subsidiary of Calgary-based Talisman Energy, recently settled an action brought by New York State Attorney General Andrew Cuomo alleging that it used deceptive tactics in attempting to persuade landowners to renew expiring leases.
In April of this year, Fortuna sent letters to 312 landowners whose leases were nearing expiration, claiming that Fortuna had the right to extend the leases for a term of three years without the landowners’ permission. In addition, Fortuna told the landowners that it had the right to place the subject leases on hold until the New York Department of Environmental Conservation issued drilling permits that would allow hydraulic fracturing. Fortuna also warned the landowners that if they failed to agree to new three-year leases, Fortuna would file liens against their properties, preventing the landowners from leasing to another company.
According to Cuomo, the leases in question contained no three-year extension clause or provision to hold the leases until a permit was issued. In a prepared statement, Cuomo said drilling companies would not be allowed to strong-arm landowners, many of whom cannot afford a private attorney, with deceptive leasing practices such as misleading letters and dubious legal claims. Fortuna will pay a $192,500 fine and has agreed to rescind the letters it sent to landowners in April. The settlement agreement also provides landowners who feel they signed leases under deceptive conditions to rescind those agreements. Cuomo said that while Fortuna is the first company to settle with his office, he is actively investigating other producers for strong-arming landowners with deceptive leasing practices.
Patricia Proctor
Chase Center - Second Floor
1000 Fifth Avenue, Suite 250
Huntington, WV 25701
304.526.8088
patricia.proctor@steptoe-johnson.com