Several Fort Worth parties, including investor and lawyer Elton Hyder, have become the latest to sue Chesapeake Energy over what they say is the improper payment of natural gas royalties. In a lawsuit filed Friday in Fort Worth district court, the plaintiffs say affiliates Chesapeake Operating and Chesapeake Exploration, along with Total E&P USA, took cost deductions in violation of their lease terms and also failed to pay royalties on natural gas liquids produced from several leases. Total, a French energy giant, acquired 25 percent of Chesapeake's holdings in the Barnett Shale in 2010.
A Chesapeake spokesman said Monday the company would not comment on the case.
"Both Chesapeake and Total employ a royalty-accounting system and gas-marketing arrangement that negatively impacts royalties," the suit alleges. Specifically, the suit claims Chesapeake sells to affiliates to produce a lower price on which it pays royalties, and then "used device and sham transactions" with its affiliates to impose post-production costs, such as pipeline gathering and compression expenses.
Further, the suit claims Chesapeake didn't pay royalties at all on natural gas liquids produced from some leases. Natural gas liquids, which are separated from produced natural gas at treating facilities, command a higher price per Btu than dry natural gas. They can significantly boost the value of the so-called "wet" gas that contains the liquids. The suit doesn't list a dollar amount for damages, and James Holmes, the Dallas attorney who filed the suit, could not be reached for further comment.
Most of the allegations mirror those of earlier cases, including a federal lawsuit filed in March by large Tarrant County landowners that included Ed Bass and Trinity Valley School. That cases is still active, according to the federal courts online database. Similar claims have also been lodged in courts in Louisiana, Pennsylvania, Oklahoma, Arkansas, Kansas and Ohio, according to news reports.
-- Jim Fuquay