On Tuesday evening, the Fort Worth City Council voted on settlement terms with the Chesapeake Energy Corp. on an ongoing lawsuit that claimed the Oklahoma City-based energy firm underpaid royalties for natural gas drilled on city land.
The city has reached a $15 million settlement with Chesapeake and Dorchester Resource, L.P, a company to which Chesapeake assigned an interest in its gas well leases. The settlement agreement will allow the parties to renegotiate their gas leases to specify pricing.
Since 2006, Chesapeake and its assignees – including Dorchester Resources, Total E&P, and Total Gas & Power North America Inc. – have operated several hundred wells on land leased from the City of Fort Worth. These wells have produced more than 200 billion cubic feet of natural gas since production began.
The city filed suit in 2013 over Chesapeake’s compliance with oil and gas leases underlying the corporation’s properties, specifically addressing the calculation of royalty payments made to the city.
The City of Fort Worth should have received royalties of 25 to 27.5 percent of the proceeds of natural gas sold, or the same percentage of its market value – whichever was higher. But the lawsuits claimed that Chesapeake and its assignees deducted costs of production, transportation, and other expenses despite their being forbidden to do so in the original contract.
Representing the city in the lawsuit was Cantey Hanger LLP, which will receive $5 million, plus expenses, for their work on this case.
Earlier this week, Chesapeake made moves to settle a similar case in a lawsuit from as many as 13,000 people in the Barnett Shale. In that case, Chesapeake and Total have agreed to pay $52.5 million, assuming certain conditions are met.
Chesapeake has been attempting to get these various lawsuits off its books following management changes at the company as well as the impact of the falling price of oil and natural gas.