Editorials

Fort Worth gas royalty fight gets even uglier

THE EDITORIAL BOARD

A Chesapeake drilling rig operates in 2011 on the banks of the Trinity River just east of downtown Fort Worth.
A Chesapeake drilling rig operates in 2011 on the banks of the Trinity River just east of downtown Fort Worth. Star-Telegram

Fighting in the family is never a happy thing, but it happens. Fort Worth and one of its most prominent and respected law firms are fighting.

A lot of money is at stake, so both sides will fight hard. Still, if each treats the other with respect, there’s no reason the family can’t remain intact.

In 2013, Fort Worth hired Cantey Hanger LLP to represent the city in lawsuits against Chesapeake Exploration and Total E&P USA over royalties from natural gas leases on city-owned land.

Total bought 25 percent of Chesapeake’s Barnett Shale leases in 2010. The city’s lawsuits said the companies underpaid royalties to the tune of $33.5 million.

A year ago, Total settled and paid the city $6 million. Last May, the city agreed to a $15 million settlement from Chesapeake.

Under its engagement agreement, Cantey Hanger was due one-third of the city’s settlement proceeds, minus some fees and expenses. The city paid the law firm $7 million, but then the two sides fell out.

The previous calculation of royalty payments obviously was faulty, so the settlements set up a new method. In December, City Attorney Sarah Fullenwider got a letter from a Houston law firm saying it represented Cantey Hanger in a claim for a third of the gain from the city’s future royalties.

Lawyers get paid to pick apart things like the engagement agreement between the city and Cantey Hanger, put them in proper legal context and come to an understanding or fight it out in court.

Settlements are preferred. It costs a lot to go to trial, and either side could lose.

We know, as Star-Telegram writer Max Baker reported, that the city’s agreement with Cantey Hanger gives the firm a third of “any and all amounts or value received by the City, whether by way of settlement, or judgment from a court.”

Cantey Hanger also fought Chesapeake over royalties due the Fort Worth school district, where its agreement called for a share of “any and all amounts or value received by the FWISD, whether by way of settlement, future royalty payments, or judgment from a court.”

The city’s agreement doesn’t specifically refer to future royalty payments.

We expect city leaders to fight hard for city money.

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