Baker, Ahles & Kaskovich

Chesapeake continues fight to keep settlement secret

Chesapeake Energy is fighting to keep its settlement with the Fort Worth school district under wraps.
Chesapeake Energy is fighting to keep its settlement with the Fort Worth school district under wraps. Hemera/Thinkstock

So how does Chesapeake Energy really feel about its partner Total E&P USA settling with the city of Fort Worth last week for $6 million?

Well, while Chesapeake is not talking (its spokesman Gordon Pennoyer in Oklahoma City offered the standard “No comment” line), its continued fight to keep its own settlement over royalty payments with the Fort Worth school district under wraps might lend everyone a clue.

(A quick reminder: The district and Chesapeake settled earlier this year but Chesapeake insisted on a confidentiality agreement. While it’s typical for lawsuit settlements in the private sector to remain confidential, those with public entities are often just that — public. When the city of Fort Worth and the Star-Telegram asked the district to disclose the deal under the Texas Public Information Act, the district referred it to Texas Attorney General, where Chesapeake is fighting its release.)

James Harris, Chesapeake’s lawyer, restated in a March 21 letter to the attorney general that the company still perceives the hundreds of other folks suing it over royalty payments — including the city of Fort Worth — as “competitors” and to late anyone else see the details would be unfair. Harris wrote that by releasing the information, it could be used by the plaintiffs as an indicator of what the value of their royalty claims are, how future royalty payments can be computed and create “unrealistic or unreasonable expectations,” among other things.

So Chesapeake had to be cringing as the Total deal with the city was laid out — again, in public. Total, which owns 25 percent of Chesapeake’s Barnett Shale leases, is paying back every buck in post-production costs ever deducted from its share of the gas. It also will pay the city the publicly posted price for natural gas at the Houston Ship Channel, minus two cents, in the future. It won’t be recalculated after it has passed through the hands of company affiliates.

The Total deal sets a floor value for the city’s lawsuit of $18 million, while someone familiar with the case suggest it’s actually $24 million. The city has been seeking in excess of $33 million. And while attorney Ralph Duggins, who represents both the city and the district, can’t tell what’s in the district settlement, don’t you think it’s likely he will use that knowledge in future talks?

Pruitt said the normal timeline for issuing an opinion by the attorney general would be Tuesday. He hopes it will be in the city’s favor. Pruitt said the city thinks the public needs to see it.

“We didn’t try to hide the Total agreement,” he said.

Stay tuned.

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