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Oil Firm Sues Dallas for $50 Million

DALLAS (CN) - An oil company that paid Dallas millions of dollars for natural gas drilling rights under public lands has sued the city after it refused to issue promised drilling permits.

Trinity East Energy sued the city in Dallas County Court on Thursday.

In 2008, Trinity paid the city $19 million for oil and gas mineral rights for on 3,600 acres of city-owned land northwest of downtown.

"In selling this real property interest to Trinity, the city knew that Trinity could only benefit from this contract if Trinity was actually allowed to drill a number of wells to produce gas," the 15-page complaint states. "The city also knew that for drilling and production to occur, the city would be required to issue certain permits and other authorizations."

Trinity claims the city disregarded its "constitutional and contractual obligations" when its Planning Commission rejecting the permit application in January and March.

Trinity appealed to the City Council, which rejected it, a rejection Trinity calls "arbitrary and capricious."

"Recognizing that the city had probably just breached a contract, committed fraud and taken Trinity's property without just compensation, city Mayor Rawlings stated on the record that the city was subjecting itself to significant litigation risk," the complaint states.

"Despite Mayor Rawlings' understanding of the city's considerable liability, the city has not attempted to compensate Trinity for the loss of value of the taken property or to pay Trinity the damages it suffered as a result of the city's actions."

Trinity claims it has spent $30 million in reliance on the city's promises and has "lost hundreds of millions more in lost profits."

It wants to "hold the city accountable for its conduct" and its "blatant breach" of the contract.

Rawlings told the Dallas Morning News that his prediction "has come true."

"We need to think carefully when we vote on actions to not put ourselves in the courthouse," Rawlings said Thursday. "That being said, I feel great about our situation and our case."

Trinity seeks actual and punitive damages for breach of contract, inverse condemnation, fraud and negligent misrepresentation.

It is represented by Arthur Anderson with Winstead PC in Dallas.

Follow @davejourno
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