Oklahoma-based Chesapeake Operating Inc. reached an agreement with over a dozen Texas oil and gas investors on Thursday to settle a royalty payment dispute.
Dallas-based law firm Burns Charest said the company, a subsidiary of Chesapeake Energy, reached a settlement with Texas oil and gas investor Edward Bass and more than a dozen other Barnett Shale mineral rights owners who alleged Chesapeake underpaid oil and gas royalties and breached its contracts with the landowners.
The settlement terms are confidential.
“We’re very pleased that this matter has been resolved. We believe the evidence was compelling on behalf of the property owners,” plantiffs’ attorney Daniel Charest of Burns Charest said.
Bass and the other property owners hold mineral rights to almost 4,000 acres in southern Tarrant County and northern Johnson County, where Chesapeake has handled production activities on some of the properties since 2007.
The lawsuit, filed in 2013, alleged that Chesapeake violated lease agreements by selling natural gas production from one corporate subsidiary to another, depressing prices and cutting the amount of royalty payments owed to each landowner.
The investors also claimed that Chesapeake took “improper deductions” from those royalty payments to cover drilling, production and post-production expenses.
“Some of the leases permitted Chesapeake to pass on production costs in certain circumstances, but court documents showed that those contractual terms were never met,” Burns Charest said in a statement.
Last month, Judge Ed Kinkeade of the U.S. District Court for the Northern District of Texas in Dallas ruled in favor of the mineral rights owners.
Both parties have asked for that ruling to be withdrawn.
Chesapeake could have faced damages of at least $8.6 million, in addition to additional damages, Burns Charest added.
The case is Trinity Valley School, et al. v. Chesapeake Operating Inc., et al., No. 3:13-cv-01082-K.