Arlington Approves Gas Royalty Settlement with Chesapeake

Arlington Reaches Gas Royalty Settlement with Chesapeake

Arlington approves gas royalty settlement with Chesapeake – From Star-Telegram Archives, Ron T. Enis

Chesapeake Energy will pay the city of Arlington $700,000 to settle a lawsuit accusing the company of using a complicated scheme devised to reduce royalty checks for gas pumped from under parks, airports and other pieces of public property.

The Arlington City Council voted 8-0 Tuesday to approve a deal reached with the Oklahoma City-based company and Total E&P USA, a French energy company that owns 25 percent of Chesapeake’s Barnett Shale holdings.

The city sued in August, saying that Chesapeake, which holds leases on about 1,900 acres of public property, based its royalty payments on gas prices that were well below the actual sales price and improperly deducted certain post-production costs.

Under the agreement, Chesapeake will no longer subtract post-production costs and the city’s royalty will be calculated based on the highest price received by Chesapeake when the gas is sold or the price established by a formula.

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Your Claim is NOT Affected by Recently Reported Chesapeake Court Decisions

On Sunday August 3, the Fort Worth Star Telegram reported on two cases that recently were decided in favor of Chesapeake on the issue of whether Chesapeake’s deductions from royalty payments were proper. The recently decided cases involved leases which included language stating that Chesapeake was not authorized to deduct any expenses from the agreed upon royalty payments. The court’s decision stated that this lease provision was contrary to the custom in the business and was therefore “surplusage”, and had no legal effect. We agree that under the vast majority of leases, Chesapeake can deduct for reasonable expenses. However, our claim is that even under the leases that permit Chesapeake to deduct expenses, it has cheated royalty owners by deducting excessive, unreasonable and unconscionable expenses. The recently decided cases do not apply to our claim against Chesapeake and will have no effect on the outcome of our cases.

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Attorney seeks property owners for royalty lawsuits against Chesapeake

From the Fort Worth Star-Telegram by Shlachter, Baker & Fuquay

Royalty Lawsuits Against Chesapeake

Cities, school districts and private property owners have sued Chesapeake Energy for allegedly underpaying natural gas royalties in Tarrant County.

It’s easy for Fort Worth lawyer Dan McDonald to put himself in his clients’ shoes for a lawsuit he expects to file against Chesapeake Energy over alleged underpayment of royalties. He says he has been shorted too.

On Tuesday evening, McDonald held his first Tarrant County meeting aimed at rounding up royalty owners for the cases. About 75 people showed up at Unity Church on Trail Lake Drive in southwest Fort Worth, where McDonald told them he thinks there are hundreds of millions of dollars at stake.

One of those attending was Paul Weide, a TCU-area resident who has pressed the company previously on royalty issues.

“So many people just don’t know what to do,” Weide said of the appeal of a mass effort like McDonald’s. “Eventually, if there’s enough people it’s worth his time” to take on the cost of preparing the cases, Weide said.

“It’s really nothing short of stealing,” McDonald said, recounting his own experience with the Oklahoma City-based natural gas producer. He said the company did not pay royalties for months and months after beginning production on mineral interests his family holds in west Fort Worth, an issue resolved only after Chesapeake needed a pipeline easement across one of the properties.

The company did not respond to a request for comment on McDonald’s efforts.


Star-Telegram sues Chesapeake over royalty payments

From the Star-Telegram’s Barnett Shale Blog

Originally posted on May 16, 2014 by Jim Fuquay

A day after the Fort Worth ISD sued Chesapeake Energy over its royalty payment practices, the Star-Telegram filed its own suit against the natural gas producer, alleging two Chesapeake units improperly deducted costs from royalties on one lease and has failed to pay royalties on another. The suit seeks between $200,000 and $1 million in damages. A number of royalty owners in the Barnett Shale, including the cities of Fort Worth and Arlington, and in other states have sued Oklahoma City-based Chesapeake over similar issues. In one of the largest such cases, the company last year paid $7.5 million to settle a class-action lawsuit in Pennsylvania alleging underpayments of royalties.

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Fort Worth school district sues Chesapeake Energy

From the Fort Worth Star-Telegram

Originally posted on May 15, 2014 by Yamil Berard

The Fort Worth school district has filed a lawsuit against Chesapeake Energy Corp. and its former chief executive officer alleging that the company improperly deducted its own expenses from royalties owed to the school district and its taxpayers.

The lawsuit, filed late Thursday afternoon in Tarrant County Judge Tom Lowe’s 236th District Court, names former Chesapeake CEO Aubrey McClendon, company affiliates and its joint venture partner, Total.

Just in the past year, the cities of Fort Worth and Arlington, the Arlington school district, a group including Fort Worth developer Ed Bass and Trinity Valley School and another group including a half-dozen prominent Fort Worth residents have filed lawsuits over royalty payments.

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Royalty Rip-off

Around the country, landowners are suing Chesapeake and other drillers for massive deductions from royalty checks.

Originally posted in Fort Worth Weekly, April 16, 2014 by PETER GORMAN


Fort Worth Weekly Cover, week f April 16, 2014

Donald Feusner used to be a dairy farmer. His 370 acres of land in northeast Pennsylvania border New York state in a gloriously lush area. In 2011, when his farm was no longer profitable, he sold off his herd and retired to what he thought would be the life of a gentleman farmer, living off the proceeds of the gas wells Chesapeake Energy had drilled on his land. And in December 2012, when the wells came in, it looked as though he’d made a safe bet: Royalty income from the first month’s production alone totaled more than $8,500.

But five months later, with the wells still producing the same amount of gas, his royalty check suddenly shrank by more than 80 percent, to just under $1,700, eaten away by what Chesapeake called “post-production costs.” In the following months, his checks dwindled even further, to almost nothing.

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Chesapeake Energy’s $5 Billion Shuffle

Chesapeake Energy’s $5 Billion Shuffle - ProPublica - Drake - Chesapeake - 630

Joe Drake (Abrahm Lustgarten for Propublica)

The energy giant raised the cash it needed to survive by slashing royalties it paid property owners to drill on their land.

By Abrahm Lustgarten ProPublica, March 13, 2014, 5:45 a.m.
This story was co-published with The Daily Beast.

At the end of 2011, Chesapeake Energy, one of the nation’s biggest oil and gas companies, was teetering on the brink of failure.

Its legendary chief executive officer, Aubrey McClendon, was being pilloried for questionable deals, its stock price was getting hammered and the company needed to raise billions of dollars quickly.

The money could be borrowed, but only on onerous terms. Chesapeake, which had burned money on a lavish steel-and-glass office complex in Oklahoma City even while the selling price for its gas plummeted, already had too much debt.

In the months that followed, Chesapeake executed an adroit escape, raising nearly $5 billion with a previously undisclosed twist: By gouging many rural landowners out of royalty payments they were supposed to receive in exchange for allowing the company to drill for natural gas on their property.

In lawsuits in state after state, private landowners have won cases accusing companies like Chesapeake of stiffing them on royalties they were due. Federal investigators have repeatedly identified underpayments of royalties for drilling on federal lands, including a case in which Chesapeake was fined $765,000 for “knowing or willful submission of inaccurate information” last year.

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Unfair Share: How Oil and Gas Drillers Avoid Paying Royalties

by Abrahm Lustgarten, ProPublica, Aug. 13, 2013, 10:20 a.m.

Don Feusner ran dairy cattle on his 370-acre slice of northern Pennsylvania until he could no longer turn a profit by farming. Then, at age 60, he sold all but a few Angus and aimed for a comfortable retirement on money from drilling his land for natural gas instead.

It seemed promising. Two wells drilled on his lease hit as sweet a spot as the Marcellus shale could offer – tens of millions of cubic feet of natural gas gushed forth. Last December, he received a check for $8,506 for a month’s share of the gas.

Then one day in April, Feusner ripped open his royalty envelope to find that while his wells were still producing the same amount of gas, the gusher of cash had slowed. His eyes cascaded down the page to his monthly balance at the bottom: $1,690.

Chesapeake Energy, the company that drilled his wells, was withholding almost 90 percent of Feusner’s share of the income to cover unspecified “gathering” expenses and it wasn’t explaining why.

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