Oil & Gas News

Texas court sides with Barnett Shale Mineral owners

Alta Mesa

FORT WORT – A Tarrant County judge has rejected efforts by Chesapeake Exploration and Total E&P USA to dismiss claims in multidistrict litigation (MDL) filed by North Texas mineral interest owners over “sham” transactions in the Barnett Shale associated with royalty payment calculations, clearing the way for the “sham” transactions claim to proceed.

Attorneys Daniel H. Charest and Spencer Cox of Dallas, of Burns Charest LLP, and co-liaison counsel James Key orchestrated the successful defense to the oil companies’ summary judgment motion, according to a press release.

On June 5, Tarrant County District Court Judge Dana Womack denied the motions, which allow the claim to move forward.

In the lawsuit, mineral owners in the Barnett Shale formation in North Texas argue that the wellhead sale of gas between Chesapeake and Total affiliates should be disregarded when calculating royalties because the practice qualifies as a “sham” transaction under Texas law.

The court’s ruling rejects legal challenges by Chesapeake and Total and ensures that Texas juries will hear evidence and decide whether the oil and gas operators used affiliate transactions to avoid contractual obligations to pay the full amount of royalties.

“The Texas Supreme Court recognized the ‘sham’ transaction theory many years ago, and operators have tried to avoid its implications ever since,” said Charest.

“We say Chesapeake and Total have benefitted from the higher value of downstream sales while using affiliate ‘sales’ at the wellhead to avoid their obligation to pay fair royalties. On those facts courts can disregard corporate formalities and calculate royalties as the leases intended on the higher prices.”

The case is In re Chesapeake Barnett Royalty Litigation #2, MDL No. 48-000000-15 in the 348th District Court in Tarrant County.

Charest represents several prominent mineral owners, including Black Stone Minerals and MAP Royalty, and serves as co-liaison counsel for the MDL plaintiffs.

Cox has played a key role in the Barnett MDL and in securing the favorable summary judgment ruling, the press release states.

The attorneys at Burns Charest have years of experience in complex oil and gas royalty disputes. The firm secured several confidential results against Chesapeake over unpaid oil and gas royalties for mineral owners including members of the Bass family in Fort Worth as part of a separate lawsuit in North Texas and other South Texas ranches in the Eagle Ford Shale.

Burns Charest is a Dallas and New Orleans-based trial law firm with a national practice representing consumers and businesses. The firm represents clients in large, complex class actions; antitrust claims; oil and gas royalty disputes; environmental pollution cases; and asbestos exposure claims.

Credit: SE Texas Record

Author: David Yates

 

Comments

The crossroads of energy information for minerals owners in Oklahoma. Where you can: See recent prices of mineral and lease transactions. Receive an offer to lease or buy your minerals.

Find relevant news stories on the most active areas, including the Scoop and Stack Plays.

Data Powered by Oseberg

Today’s E&P world is rapidly shifting towards data-driven decision making, but those decisions are only as good as the data behind them. Access Oseberg's deep, accurate, and detailed pool of insight-rich industry data with our powerful analytical and search tools and get the clearest picture of what's happening as soon as it happens.

Disclaimer

This web site is maintained solely for the personal use of our visitors. Although we at Oklahoma Minerals have made all reasonable efforts to provide accurate information, we cannot guarantee the completeness, timeliness or accuracy of the information contained herein. Nothing in this web site contains investment advice. Any decisions based upon the information contained in this web site are the sole responsibility of the user.

Copyright © 2020 OklahomaMinerals.com

To Top
Why Natural Gas Prices Are Set To SoarRead More