Chesapeake Energy Corp. appears ready to get many of the lawsuits it is facing off the books. The company has settled a case in the Barnett Shale and may have a settlement with the City of Fort Worth.
Oklahoma City-based Chesapeake Energy and Total E&P USA on Monday said they have agreed to pay $52.5 million to 13,000 people, many of whom who owned small-acreage leases, and claimed underpayment of royalties for leases in the Barnett Shale.
Chesapeake will pay $29.4 million, while Total will pay $13.1 million, with the remaining $10 million being paid through a Chesapeake promissory note payable in three years.
The lawsuits were filed in 2014 and 2015 in Fort Worth by leaseholders and residents in Johnson, Tarrant and Dallas counties. According to the parties involved, the payments will vary widely because many of the suits involve small landowners.
“After three weeks of good faith mediation led by a former Federal Judge, the MDL #1 case has been resolved to our satisfaction, though it is subject to our clients’ written approval,” said George Parker Young, of the McDonald Law Firm/Circelli, Walter, & Young. “We are pleased that we have achieved a mutually acceptable global settlement and greatly appreciate the constructive approach taken by Chesapeake’s current leadership to resolve this matter.”
As part of the settlement, 90 percent of the plaintiffs must agree in writing that they approve of the terms of the agreement by July 11 or Chesapeake and Total have the right to withdraw the offer. Lawyers for the parties also negotiated a two-year standstill agreement during which any underpayments or non-payments of royalty claims will accrue.
“We are pleased to have reached a mutually acceptable resolution of this legacy issue and look forward to further strengthening our relationships with our royalty owners,” Gordon Pennoyer, director of strategic communications at Chesapeake, said in a written statement.
The settlement follows two closely followed cases in the Texas Supreme Court, one in 2015 and one earlier this year between Chesapeake and the Hyder family of Fort Worth. In that legal case, the family – as in the current suits – said Chesapeake had wrongly deducted costs from royalty payments.
Meanwhile, the Fort Worth City Council on Tuesday will vote on a settlement of a lawsuit with Chesapeake Energy Corp. that says the energy company underpaid royalties on city land.
It was not clear how much the settlement would be worth. But in March, the City Council settled all claims against French energy firm Total E&P for $6 million. In 2010, Total had purchased one-quarter of Chesapeake leases in the area.
Under the agreements with Chesapeake and Total, Fort Worth was supposed to receive royalties of 25 percent to 27.5 percent of the natural gas sold or the market value. But the city said the companies improperly deducted costs of production, transportation and other expenses.
While the total figure of the settlement has not been disclosed, the city will pay the law firm of Cantey Hanger 33 and 1/3 percent of the total cash payment received under the settlement, plus expenses for the firm’s work on the case.