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Fort Worth Joins Arlington and Many, Many Landowners in Suing Chesapeake Energy Over Royalties

More plaintiffs are lining up to take a crack at Chesapeake Energy, this time joined by the city of Fort Worth. It's the second major North Texas city to file suit against the first player to make a big splash extracting natural gas from the Barnett Shale. Arlington brought its $1 million claim to court in August.

Fort Worth's allegations are not particularly new, which is the troubling part. We've written before about landowners who say the company deducted production costs from their royalties. Their contracts, they claim, don't allow for any of that. Chesapeake has since settled with at least one of the landowners we last wrote about, and a casual perusal of the Internet reveals it has paid out millions more to mineral owners elsewhere. But the inclusion of Fort Worth and Arlington in the flurry of lawsuits, some of them class action, adds profile and weight to claims that Chesapeake is playing fast and loose with the terms of its royalty agreements,

Like all the other plaintiffs, Fort Worth claims the company shafted taxpayers by deducting production costs from royalties, and by conducting sham transactions with its gas-gathering subsidiaries to depress the wellhead price of the natural gas and, thus, the royalties it pays out to mineral owners. Mayor Betsy Price told the Fort Worth Star-Telegram that she had city attorneys investigate royalty payment records to determine whether the city was getting screwed.

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She didn't want to sue but was left with little choice. "We were advised this is the best way to see our taxpayers are protected and receive all the dollars they should," Price said.

This comes at a time when the company is working to extricate itself from the morass ousted CEO Aubrey McClendon led it into. When fracking made the Barnett Shale economically feasible, McClendon led Chesapeake on a Wall Street-fueled, gas-lease buying binge that turned sour when prices tanked. When Reuters uncovered his under-the-table, $200 million hedge fund, which was betting on the very commodity his company produced, his fall from grace truly began. Since then, a bloated Chesapeake has been off-loading assets -- including its Fort Worth tower -- along with employees and at least four top executives.

Now it's got Cowtown on its ass.

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