Chesapeake accused of cheating on royalty payments




Posted on March 15, 2013 at 6:53 PM

DALLAS -- New troubles are bubbling to the surface for Chesapeake Energy in the Barnett Shale.

Fort Worth billionaire Ed Bass, whose family fortune is grounded in oil, says one of the biggest drilling companies in the country is pulling a slick one. He's suing Chesapeake Energy, accusing them of cheating him and 22 others out of millions of dollars in royalties.

The suit alleges, "Chesapeake uses its contracts with its affiliates [...] to suppress the prices on which it pays royalties [...] to the plaintiffs.” The underpayments, the suit alleges, "...may result from inaccurate internal accounting or [...] from sham transactions with its affiliates. Whichever means, Chesapeake has failed to pay royalties.”

Fort Worth Attorney Shayne Moses would know. He represented Dallas, Fort Worth, and D/FW International Airport in a royalty underpayment dispute that was settled with Chesapeake last year.

"I believe Chesapeake's interpretation of leases result in a very widespread underpayment,” Moses said.

He said even a $0.10 underpayment of royalties per well can add up.

"That ten cents may not sound significant, but when you are looking at significant volumes, then you are talking tens, then hundreds, then millions of dollars,” Moses said.

As a result of his suit, Chesapeake repaid more than $5 million in royalties. But what about the average homeowner, who can't afford to sue?

That was the subject of a News 8 investigation last fall.

Among those we profiled was Carolyn Green of Fort Worth, who had never seen a royalty check from Chesapeake, despite impressive production numbers from her gas well.

"I have a copy here of some production numbers, and it looks real good since Chesapeake has been pumping,” Green said.

Now, nearly five months later, Green said she has yet to see a dime. She said some of her neighbors have been paid only a few dollars in royalties, but that Chesapeake keeps promising to pay her.

Chesapeake Energy declined to comment on the Bass lawsuit.