City of Fort Worth joins Arlington in suit against Chesapeake Energy

Posted Friday, Oct. 18, 2013  comments  Print Reprints

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Fort Worth joined several other individuals and cities suing Chesapeake Energy, claiming underpayment of royalties.

The suit was filed in the 48th District Court in Tarrant County on Thursday, and states that Chesapeake underpaid royalties by improperly deducting costs of production services and making sham sales with below market value prices on natural gas to its affiliates. Also listed in the suit is Total E&P, a French energy company that acquired 25 percent of Chesapeake’s holdings in the Barnett Shale in 2010.

Gordon Pennoyer, director of external communications at Chesapeake Energy, declined to comment.

Mayor Betsy Price said the city was prompted to investigate their dealings with Chesapeake after several other entities, including other cities, filed lawsuits against the Oklahoma-based corporation.

Arlington filed suit against Chesapeake on Aug. 6, seeking more than $1 million in damages.

The city sent attorneys and other employees to Chesapeake headquarters a few months ago to examine the records pertaining to Fort Worth’s royalties, Price said.

The results of that investigation led city officials to believe they had been underpaid and the terms of their lease had been violated, Price said.

She said the city did not want to press through with a lawsuit, but that the officials have a duty to the taxpayers.

“We were advised this is the best way to see our taxpayers are protected and receive all the dollars they should,” Price said.

Ralph Duggins, partner with Cantey Hanger LLP, is representing Fort Worth in the suit, and said the city is seeking information on production from the wells located on city leases and information on actual sales that Chesapeake’s affiliates made on the gas wells.

The city is seeking damages for the royalties due, the payment of attorneys’ fees related to the suit and breach of contract and interest on unpaid royalties.

A federal lawsuit against Chesapeake was filed in March by Tarrant County landowners, including Ed Bass and Trinity Valley School, citing similar problems.

Caty Hirst, 817-390-7984 Twitter: @CatyHirst

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