Tarrant County hires firm to sue Chesapeake over royalty payments

While other governmental entities are settling their lawsuits against Chesapeake Energy, Tarrant County Commissioners voted Tuesday to hire an outside law firm to sue the Oklahoma energy giant over underpayments stemming from their natural gas leases.

Commissioners agreed to hire the Moses, Palmer and Howell law firm to file a lawsuit against Chesapeake and Total E&P USA, the French energy firm that owns 25 percent of Chesapeake’s Barnett Shale holdings.

“We have engaged an attorney to represent us to see if we can negotiate a settlement,” said Tarrant County Administrator G.K. Maenius. “Our goal today was to take the next step through the filing of this lawsuit.”

Gordon Pennoyer, a spokesman for Chesapeake in Oklahoma City, declined to comment.

In numerous lawsuits Chesapeake, once among the leading drillers in North Texas, is accused of using sham deals and fraud to subtract post-production costs from its royalty payments. Chesapeake has argued in court filings that the royalties it paid were allowed under the lease terms.

But in the past few months, several public agencies have settled with Chesapeake or Total out of court. The Fort Worth school district settled its lawsuit at the first of the year for $1 million. The district’s lawsuit included at least 30 leases covering at least 1,000 acres.

In March, Total settled its part of the lawsuit with city of Fort Worth for $6 million. Fort Worth and Chesapeake are still in court over 260 leases covering about 5,800 acres of city property in Tarrant and Johnson counties.

The Tarrant County College District still has a pending lawsuit against Chesapeake. But the city of Arlington and the Arlington school district are among the other government entities that have reached out-of-court settlements with Chesapeake in the past few years.

Tarrant County has only seven leases with Chesapeake and Maenius did not know how many wells were involved. He said the county simply doesn’t have as many leases as the school district.

Still, he said that “because of the settlements we’re seeing with other governmental entities, we needed to move forward with this action,” he said.

Pressure on Chesapeake to begin settling hundreds of lawsuits filed against it over its business practices may be building. It has been making deals in other cases brought by large landowners and businesses.

About a month ago, Chesapeake settled the first two cases set for trial in April and May involving Fort Worth attorney Dan McDonald, who has filed more than 400 lawsuits against the company over royalty payments.

The settlement postponed any courtroom battle between Chesapeake and McDonald until June, unless the two sides reach more out-of-court deals.

This story was originally published May 3, 2016 at 3:29 PM with the headline "Tarrant County hires firm to sue Chesapeake over royalty payments."