HOUSTON (CN) – Chesapeake Energy has shorted royalty owners by more than $1 billion for natural gas it pulled from the Haynesville Shale, property owners claim in court.
Blunt Properties LLC sued Chesapeake Energy Corp. seeking “double the amount of royalties due” plus interest, in Harris County Court.
Blunt’s lawsuit is one of eight filed in Houston on May 15 against the Oklahoma City-based company.
Blunt owns land in DeSoto Parish, La. that it leases to Chesapeake.
The land sits on the Haynesville Shale, a formation underneath southwest Arkansas, East Texas and northwest Louisiana.
With the advent of hydraulic fracking, which involves injecting water, chemicals and sand into wells to open up holes in rock and extract oil and natural gas, such formations have become attractive investments for drilling companies.
Blunt Properties claims Chesapeake is running a massive fraud on Haynesville Shale stakeholders.
“The total royalty underpayments for the Haynesville Shale alone exceed several hundred million dollars, if not over $1 billion,” the complaint states.
Blunt claims Chesapeake does not calculate the volume of gas it extracts at the well, but uses “lower volume measurements” to cheat on royalties.
It claims Chesapeake also passes on the post-production costs of compressing the gas, removing water from it and transporting it.
Blunt seeks damages for breach of contract and fraud. It also wants the contract rewritten so post-production costs are not deducted from royalties.
It is represented by Dan McDonald of Fort Worth, who also represents the other plaintiffs who sued Chesapeake in Houston on May 15.
Defendants include Freeport-McMoRan Oil & Gas, PXP Louisiana, and PXP Louisiana Operations, Houston-based companies that merged in May 2013 and have a 20 percent stake in Chesapeake’s Haynesville Shale holdings, according to the complaint.
A Chesapeake spokesman declined to comment.
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