Dallas/Fort Worth Airport is considering a $9 million settlement with Chesapeake Energy to resolve a lawsuit claiming that the gas drilling company failed to meet its commitment to drill more wells on airport property.
Under the proposed deal, Chesapeake would pay the airport $8 million related to its drilling commitment and a $1 million royalty payment. The Oklahoma City-based company has also agreed to plug and abandon several wells and decommission a pipeline. The proposal will be discussed at the airport’s board committee meetings on Tuesday.
DFW Airport filed the lawsuit against Chesapeake on June 15, saying the producer had failed to fulfill terms of a 2012 settlement of a previous lawsuit that alleged it was shortchanged on royalty payments. As part of that agreement, the airport received $5 million from Chesapeake plus assurances that it would drill additional wells on airport property.
“To date, none of the required 14 wells have been drilled,” the lawsuit says, noting that Chesapeake had until the end of 2015 to drill six wells and an additional 8 wells by the end of this year.
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Chesapeake drilled 112 wells at the airport but stopped drilling in 2009 when gas prices collapsed. The airport received a massive $185 million bonus when it signed its lease agreement with Chesapeake in 2007, and by February of 2012 had received $293.4 million from the deal. The airport used its proceeds to pay for capital projects including the massive renovation of terminals that is still underway.
The proposed agreement also asks the court to decide whether the drilling commitment required vertical or horizontal wells. If the court finds in the airport’s favor, DFW Airport could receive an additional $10 million from Chesapeake. The lawsuit asked for damages totaling over $35 million.
Chesapeake, once a leading player in the Barnett Shale drilling boom, has been scaling back and shedding assets as it works to reduce a large dept load.
Earlier this month, Chesapeake announced that it’s exiting the Barnett Shale, transferring 215,000 acres of natural gas assets and over 2,800 operating wells to Saddle Barnett Resources Llc. The company has settled numerous other lawsuits, including a $51 million deal with more than 13,000 clients represented by two Fort Worth law firms.
If the airport board approves the Chesapeake settlement, the leases on its wells will transfer to Saddle Barnett.