Fort Worth to receive $15 million in settlement of Chesapeake lawsuit

In one of its largest settlements, Chesapeake Energy has agreed to pay Fort Worth $15 million to settle the city’s lawsuit against the natural gas provider.

The sum, while considered among the company’s high-value settlements, is $18.5 million less that what the city said it was owed. But, the settlement must be paid by May 31, according to city documents.

Under the agreement, royalty payments going forward will be calculated on Houston Ship Channel prices without any reduction for post-production costs and expenses, according to a city resolution. Those revenues will be retroactive to April 1, the city said.

“This is a very good settlement,” said Mayor Betsy Price. “Obviously, we would have liked to have the whole thing. We’ve actively pursued this on behalf of our citizens and taxpayers and we feel comfortable with where we are. We are particularly pleased with payments going forward. It adds up to a lot.”

The council voted 9-0 Tuesday night to approve the resolution authorizing the settlement and amending its gas leases with Chesapeake and Oklahoma City-based Dorchester Resources.

In court records, Fort Worth said it was owed $33.5 million in royalty payments from more than 260 leases on about 5,800 acres of city property in Tarrant and Johnson counties.

In March, the city settled a similar lawsuit with Total E&P USA, Chesapeake’s partner in the Barnett Shale, for $6 million. Total agreed to pay the Houston Ship Channel price, minus 2 cents, on its portion of the gas and not deduct post-production costs.

In 2013, the city sued Chesapeake and Total, which owns a 25 percent interest in the leases. Chesapeake has had leases with the city since 2006. Total acquired its stake in 2010.

This week, Chesapeake and Total also agreed to pay $52.5 million to settle 400 lawsuits involving 13,000 small property owners in Tarrant and Johnson counties.

Chesapeake has also reached a $1 million out-of-court settlement with the Fort Worth school district. In 2012, Chesapeake settled for $5 million with Dallas/Fort Worth Airport over lease payments, and in 2014, the company agreed to pay $700,000 to the city of Arlington for underpaid royalties owed on about 1,900 acres of city property.

The Tarrant County College District still has a pending lawsuit, and Tarrant County commissioners have said they want to hire a law firm to sue Chesapeake over seven leases it has with the company.

The city will pay $5 million to the Cantey Hanger law firm, which helped in negotiations with Chesapeake.

This story was originally published May 24, 2016 at 4:06 PM with the headline "Fort Worth to receive $15 million in settlement of Chesapeake lawsuit."