AG orders district to release settlement details over Chesapeake
objections. Chesapeake faces hundreds of similar lawsuits over royalty
payments by Max B. Baker with contributions by Yamil Berard, April 13, 2016, Fort Worth Star Telegram
The Fort Worth school district settled its lawsuit with Chesapeake Energy over natural gas royalties for $1 million, according to documents released Monday after the Texas attorney general decided that the information is public.
The attorney general’s office ordered the district to release details of the out-of-court settlement despite efforts by Chesapeake to keep it private through a confidentiality agreement signed by both parties in December. The Star-Telegram, along with the city of Fort Worth, sought to have the settlement agreement, approved by the Fort Worth school board in January, released under the Texas Public Information Act.
The school district accused the Oklahoma energy giant of using sham deals and outright fraud to subtract post-production costs from its natural gas royalty payments.
WE FIND CHESAPEAKE HAS FAILED TO DEMONSTRATE RELEASE OF THE
INFORMATION AT ISSUE WOULD GIVE ADVANTAGE TO A COMPETITOR OR
Assistant Texas Attorney General Nicholas Ybarra
The attorney general’s opinion was issued Friday, and the school district released the two-page settlement document — a more formal agreement is supposed to be written later — on Monday after the Star-Telegram requested the details.
Chesapeake, which faces hundreds of similar lawsuits over royalty payments, argued that releasing the settlement details would allow the information to be used against the company in other litigation. In its arguments, Chesapeake portrayed other litigants as “competitors.”
But Assistant Texas Attorney General Nicholas Ybarra was not persuaded by that argument.
“We find Chesapeake has failed to demonstrate release of the information at issue would give advantage to a competitor or bidder,” Ybarra wrote in a Friday letter released Monday. “Accordingly, the district may not withhold any of the submitted information.”
Gordon Pennoyer, a Chesapeake spokesman in Oklahoma City, declined to comment on the ruling by the attorney general but said the company is “pleased to have reached a fair and reasonable agreement and looks forward to further strengthening our relationship with the Fort Worth Independent School District.”
Open government advocates were eagerly awaiting the attorney general’s decision.
“We’re gratified the attorney general ruled in favor of the public’s right-to-know concerning the agreement between the school district and Chesapeake,” said Star-Telegram Executive Editor Jim Witt.
Kelley Shannon, executive director of the Freedon of Information Foundation of Texas, said, “This is a positive and important ruling by the Texas attorney general’s office. Taxpayers have a right to know how their money is managed by elected officials, including legal settlements made on behalf of citizens.”
The Fort Worth school district did not take a position on releasing the information.
In its lawsuit filed in 2014, the district accused Chesapeake of cheating it out of an unspecified amount of money from royalty payments by subtracting unacceptable post-production costs. The district’s lawsuit included at least 30 leases covering at least 1,000
Chesapeake argued that the procedures it used to drill, market and sell natural gas complied with the lease. In settling the lawsuit in January, it did so without admitting any wrongdoing.
Attorneys and others familiar with the Chesapeake lawsuits say the company was seeking confidentiality not only for how much is being paid out, but also for other settlement considerations such as how leases will be handled in the future.
Chesapeake cited a Texas Supreme Court ruling from June that said a private company doing business with a public entity can ask that details be kept private if it feels that release would give competitors an advantage.
Under the terms of the settlement, Chesapeake agreed to pay the district the price for the Natural Gas Pipeline Co. of America-Texok Zone as published in an industry market report minus 65 cents per million British Thermal Units of natural gas.
Chesapeake also agreed to pay $50,000 in attorneys fees.
The deal also releases any claims against Total E&P USA, which owns a 25 percent stake in Chesapeake’s Barnett Shale holdings.
Last month, Total settled its lawsuit with the city of Fort Worth for $6 million. The settlement covered 5,800 acres of city property and about 260 leases in Tarrant and Johnson counties.
The city of Fort Worth’s lawsuit against Chesapeake is still pending. The city is suing for more than $33 million. [Emphasis added]
Chesapeake continues fight to keep settlement secret by Max B. Baker, March 25, 2016, Fort Worth Star Telegram
Chesapeake Energy tells Texas to keep its settlement with Fort Worth school district under wraps
Chesapeake views plaintiffs as “competitors” who shouldn’t see how it settles its lawsuits
Decision by Texas Attorney General’s office expected on Tuesday
So how does Chesapeake Energy really feel about its partner Total E&P USA settling with the city of Fort Worth last week for $6 million?
Well, while Chesapeake is not talking (its spokesman Gordon Pennoyer in Oklahoma City offered the standard “No comment” line), its continued fight to keep its own settlement over royalty payments with the Fort Worth school district under wraps might lend everyone a clue.
(A quick reminder: The district and Chesapeake settled earlier this year but Chesapeake insisted on a confidentiality agreement. While it’s typical for lawsuit settlements in the private sector to remain confidential, those with public entities are often just that — public. When the city of Fort Worth and the Star-Telegram asked the district to disclose the deal under the Texas Public Information Act, the district referred it to Texas Attorney General, where Chesapeake is fighting its release.)
James Harris, Chesapeake’s lawyer, restated in a March 21 letter to the attorney general that the company still perceives the hundreds of other folks suing it over royalty payments — including the city of Fort Worth — as “competitors” and to late anyone else see the details would be unfair. Harris wrote that by releasing the information, it could be used by the plaintiffs as an indicator of what the value of their royalty claims are, how future royalty payments can be computed and create “unrealistic or unreasonable expectations,” among other things.
So Chesapeake had to be cringing as the Total deal with the city was laid out — again, in public. Total, which owns 25 percent of Chesapeake’s Barnett Shale leases, is paying back every buck in post-production costs ever deducted from its share of the gas. It also will pay the city the publicly posted price for natural gas at the Houston Ship Channel, minus two cents, in the future. It won’t be recalculated after it has passed through the hands of company affiliates.
The Total deal sets a floor value for the city’s lawsuit of $18 million, while someone familiar with the case suggest it’s actually $24 million. The city has been seeking in excess of $33 million. And while attorney Ralph Duggins, who represents both the city and the district, can’t tell what’s in the district settlement, don’t you think it’s likely he will use that knowledge in future talks?
Pruitt said the normal timeline for issuing an opinion by the attorney general would be Tuesday. He hopes it will be in the city’s favor. Pruitt said the city thinks the public needs to see it.
“We didn’t try to hide the Total agreement,” he said. Stay tuned. [Emphasis added]
[Refer also to:
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