By Mark Curriden
The Texas Lawbook
Oklahoma-based Chesapeake Energy and Total E&P USA agreed Monday that they will pay $52.5 million to 13,000 people who claimed their royalties have been underpaid for leases in the Barnett Shale.
As part of the agreement, Chesapeake will provide $29.4 million upon court approval of the settlement and another $10 million in three years. Total will pay $13.1 million in cash when the deal is finalized.
The lawsuits, filed in 2014 and 2015 in Fort Worth, by residents in Johnson County, Tarrant County and Dallas County accuse Chesapeake and Total of failing to pay royalties the companies agreed to in their contracts. The payments will vary widely among the 13,000 claimants – from only a few hundred dollars for some to several hundred thousand dollars for others.
“After three weeks of good faith mediation led by a former federal judge, the case has been resolved to our satisfaction, though it is subject to our clients’ written approval,” said George Parker Young, a partner at Circelli, Walter, & Young in Fort Worth who represents many of the plaintiffs. “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.”
Under 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. Total E&P is a subsidiary of the French oil and gas company Total.
“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 $52.5 million settlement follows two decisions by the Supreme Court of Texas – one earlier this year and one in 2015 – that Chesapeake wrongly deducted $1 million in costs from royalty payments it is supposed to pay a Fort Worth family.
In addition, Total agreed two months ago to pay $6 million to settle a similar royalty lawsuit brought by the city of Fort Worth, which also sued Chesapeake. Lawyers involved in the litigation say they expect Chesapeake to settle its part of that litigation soon, too.
The settlement announced Monday does not impact lawsuits filed in March by Young and other lawyers on behalf of land owners in the Eagle Ford Shale who claim that Chesapeake and Chinese National Offshore Oil Company underpaid royalties under lease agreements for wells on approximately 30,000 acres in the Eagle Ford.
The lawsuits claim that Chesapeake and CNOOC breached these lease agreements for several years by improperly deducting costs from royalty payments in contravention of the terms of the leases and failing to pay royalties that are no less than fair market value of the crude oil.
Those cases are pending in the courts of Tarrant County.