EPA Sees Link Between Fracking & Earthquakes

August 23, 2016
By David Lee
DALLAS (CN) — In a rebuke to Texas regulators, the U.S. Environmental Protection Agency stated for the first time that there is a “significant possibility” that disposal wells for fracking are causing earthquakes in the Dallas area.
Irving, a northwest suburb of Dallas, has been rattled by several earthquakes since April 2014, with the highest magnitude of 3.6 recorded in January 2015. The earthquakes shook the city of 230,000 though there are no active fracking or wastewater injection wells in the city.
The Texas Railroad Commission, which regulates oil and gas drilling, has been reluctant to acknowledge any connection between drilling and earthquakes, despite the conclusions of scientists and regulators in other states. The commission has said that scientific data do “not sufficiently support a causal relationship,” according to the EPA.
But in an Aug. 15 report, the EPA said: “In light of findings from several researchers, its own analysis of some cases, and the fact that earthquakes in some areas diminished following shut-in or reduced injection volume in targeted wells, EPA believes there is significant possibility that North Texas earthquake activity is associated with disposal wells.”
The 61-page report is the EPA’s annual evaluation of the Railroad Commission’s underground injection control program released. It commends the Railroad Commission for its “early engagement” with disposal well operators near earthquakes in Azle, Cleburne and Dallas-Fort Worth International Airport.
“This action resulted in successful voluntary closure or injection volume reduction for several Class II disposal wells,” the EPA said in the report. “Seismic activity in these three areas substantially diminished in frequency and magnitude; however, earthquake events continue in other areas of North Texas.”
The EPA says in the report that it is “concerned” by the level of seismic activity because of “the potential to impact public health and the environment,” including drinking water.
“EPA recommends close monitoring of injection activity through daily recording and reporting of accurate injection pressures and volumes from area disposal wells, coupled with appropriate data analysis methods, in a coordinated effort to detect possible correspondence with seismic activity.”
Fracking, or hydraulic fracturing, involves injecting pressurized fluid to break shale rocks to release natural gas. It was popular for several years in the vast Barnett Shale in North Texas, as rising energy prices made the expensive process more profitable.
Citing environmental fears, the nearby city of Denton tried to ban fracking but was overruled by the Texas Legislature, which passed a law last year prohibiting cities from regulating drilling.

From Courthouse News.

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Lawyer Wants Cut of Fees From Chesapeake Settlement

July 18, 2016
By David Lee
FORT WORTH (CN) – A Texas attorney is demanding one-third of the legal fees from a $51 million natural gas royalty settlement between Chesapeake Energy and 13,000 Texas landowners, claiming he developed the “blueprint for victory” while co-counsel got the public “recognition and spotlight.”
Jim Ward and Wardlaw Services sued Dan McDonald and Fort Worth-based law firms McDonald Law Firm and Circelli, Walter & Young in Tarrant County Court on Friday.
Chesapeake and its partner, France-based Total S.A., announced in May that they had settled the hundreds of lawsuits filed by landowners over the North Texas Barnett Shaleformation, mostly in Tarrant and Johnson counties.
The defendant law firms said last week they had obtained written approval from the required 90 percent of their clients by the July 11 deadline.
Chesapeake agreed to pay $29.4 million in cash and $10 million through a loan payable in 2019. Total agreed to pay $13.1 million in cash.
Ward claims the settlement would not have happened without his “indispensable contribution” as co-counsel. A database of “critical evidence” already existed when McDonald was soliciting clients, Ward says in the complaint.
“Ward, together with his team of consultants and experts, developed and possessed the blueprint for victory,” the 16-page complaint states. “Proving any one royalty owner’s case would be difficult and time-consuming on its own. Moreover, in the case of thousands of plaintiffs, it would be cost-prohibitive, as many plaintiffs only stood to gain a few hundred dollars if they prevailed against Chesapeake. Ward, an attorney with significant oil and gas experience, spent two years piecing together documents, court records, and data which effectively proved the case for all plaintiffs, not just certain plaintiffs.”
Ward says that when he asked McDonald for an accounting of the settlement, McDonald refused. He claims McDonald took the position that “at most, the agreement only pertained to approximately 6 (of the more than 13,000) plaintiffs.” (Parentheses in complaint.)
McDonald Law Firm did not immediately respond to an email message requesting comment Sunday evening.
Ward seeks a restraining order and injunction, as he expects the settlement money to be wired to a trust account held by Circelli Walter on Monday.
He also seeks compensatory and punitive damages for breach of contract, unjust enrichment, promissory estoppel, fraud, tortious interference, money had and received, reformation and theft.
He is represented by Philip Russ in Amarillo and Bryan N.B. King with Fellers Snider in Oklahoma City.

From Courthouse News.

Texans OK Chesapeake Energy’s $51 Million Offer

July 14, 2016
By David Lee
FORT WORTH (CN) — More than 11,800 Texas landowners have approved a $51 million settlement with Chesapeake Energy and Total S.A. over claims they were cheated out of natural gas royalties, their attorneys said Wednesday.
The McDonald Law Firm and Circelli, Walter & Young in Fort Worth announced that 91 percent of their 13,000 clients agreed to the settlement reached in May, the Fort Worth Star-Telegram reported.
The clients who agreed to the settlement account for 97.15 percent of the natural gas produced on the owners’ lands.
The attorneys had until July 11 to persuade at least 90 percent of their clients who held at least 95 of the natural gas produced from May 2011 to February this year to agree to the settlement.
The original settlement amount of more than $52 million was prorated to match the 97.15 percent of natural gas produced.
“We are pleased that the required number of plaintiffs … have accepted the terms of the settlement agreement, resolving this matter,” the law firms and Chesapeake said in a joint statement.
Chesapeake agreed in May to pay $29.4 million in cash and $10 million through a loan payable in 2019. Total agreed to pay $13.1 million in cash under the deal.
More than 13,000 landowners from North Texas’ Barnett Shale filed the lawsuits, mostly in Tarrant and Johnson County courts.
In a 2012 federal lawsuit, one proposed class of landowners said they signed leases that expressly banned deduction of expenses from royalties, including costs of treating, marketing and transporting the gas to market.
“But instead of paying royalty without deduction of post-production costs, as required by the lease, the Chesapeake entities improperly subtracted post production costs from the royalty due to the plaintiffs,” the complaint stated. “The Chesapeake entities employed a scheme whereby they ignored the contract language and made extensive deductions of post-production costs that were the Chesapeake entities’ obligations.”

From Courthouse News.

Chesapeake CEO’s Fatal Crash Called Accident

June 8, 2016
By David Lee
OKLAHOMA CITY (CN) – Oklahoma’s medical examiner said Wednesday the single-car crash that killed former Chesapeake Energy CEO Aubrey McClendon was accidental, quelling suspicions that he committed suicide after a federal conspiracy indictment.
McClendon was killed when his Chevrolet Tahoe slammed into an Oklahoma City highway embankment on March 2. Police said he was not wearing a seat belt and was traveling as fast as 88 miles per hour before impact.
His death came a day after federal prosecutors charged McClendon with one count of conspiring to rig bids in oil and gas leases, in violation of the Sherman Act. If convicted, he could have faced up to 10 years in federal prison and a $1 million fine. Prosecutors dropped the case after this death.
The Oklahoma Office of the Chief Medical Examiner concluded Wednesday that McClendon died from “multiple blunt force trauma” to his torso and extremities and that his body had charring and “burns, according to news reports. Toxicology testing concluded there was no evidence of carbon monoxide or alcohol in his body. Doxylamine, an ingredient in cold and allergy medicine, was reportedly detected but not confirmed in McClendon’s liver.
The report comes one day after police concluded their investigation, saying they also found no indication the crash was anything other than an accident.
McClendon “orchestrated a conspiracy” with another oil and gas company “to not bid against each other” for leases in northwest Oklahoma from December 2007 to March 2012, according to the indictment against him. McClendon had steadfastly denied the allegations against him the day before his death.
More than 800 civil lawsuits have been filed against Chesapeake in the past three years, most of them accusing the company of underpaying property owners for oil and gas royalties, according to the Courthouse News database.
Founded by McClendon in Oklahoma City in 1989, Chesapeake is the second-largest natural gas producer in the country. It expanded its business through hydraulic fracturing, or fracking, in major domestic shale formations, including the Marcellus Shale, spanning from West Virginia to New York, and the Barnett Shale in North Texas.
McClendon also co-owned the National Basketball Association’s Oklahoma City Thunder, which plays its home games at Chesapeake Energy Arena.
Two weeks ago, Chesapeake and French energy partner Total agreed to pay over $52 million to settle hundreds of lawsuits filed by 13,000 North Texas landowners who claimed they were cheated out of natural gas royalties.

From Courthouse News.

Chesapeake Energy Settles Hundreds of Gas Royalty Claims

May 23, 2016
By David Lee
DALLAS (CN) — Chesapeake Energy and a French partner agreed to pay over $52 million to settle hundreds of lawsuits filed by North Texas landowners claiming they were cheated out of millions in natural gas royalties.
Oklahoma City-based Chesapeake announced the settlement on Monday, agreeing to pay $29.4 million in cash and $10 million through a loan payable in 2019. Chesapeake’s partner in the joint venture, France-based Total S.A., will pay $13.1 million in cash under the deal.
“We are pleased to have reached a mutually acceptable resolution of this legacy issue and look forward to further strengthening our relationships with our royalty owners,” Chesapeake spokesman Gordon Pennoyer said in a statement.
The lawsuits were filed by 13,000 landowners in North Texas’ Barnett Shale. The cases were mostly filed in Tarrant and Johnson County courts, and by Fort Worth-based law firms Circelli, Walter & Young and the McDonald Law Firm.
In a federal lawsuit filed in 2012, one proposed class of landowners said they signed leases that expressly banned deduction of expenses from royalties including costs of treating, marketing and transporting the gas to market.
“But instead of paying royalty without deduction of post-production costs, as required by the lease, the Chesapeake entities improperly subtracted post production costs from the royalty due to the plaintiffs,” the complaint stated. “The Chesapeake entities employed a scheme whereby they ignored the contract language and made extensive deductions of post-production costs that were the Chesapeake entities’ obligations.”
Attorneys for the landowners have until July 11 to get written approval for the settlement by at least 90 percent of their clients.
Attorney George Parker Young said the settlement was reached after three weeks of “good faith mediation” by a former federal judge.
“(T)he case has been resolved to our satisfaction, though it is subject to our clients’ written approval,” Young said in a statement. “We are pleased that we have achieved a mutually acceptable global settlement and greatly appreciate the constructive approach taken by Chesapeake’s current leadership to resolve this matter.”

From Courthouse News.

Antitrust Complaint Filed Against Chesapeake Gas

March 4, 2016
By David Lee
OKLAHOMA CITY (CN) – Chesapeake Energy leaseholders sued the company Thursday in a federal antitrust class action, two days after its former CEO Aubrey McClendon was charged with rigging bids and the day after he died in a fiery single-car crash.
Brian Thieme sued Chesapeake, SandRidge Energy, and former SandRidge CEO Tom L. Ward, seeking treble damages for oil and gas leaseholders. The complaint cites the Tuesday indictment charging McClendon with of conspiring to rig bids in violation of the Sherman Act.
“The combination and conspiracy affected not only the interests and properties that defendants Chesapeake and SandRidge Energy purchased, but also the overall market,” the 14-page complaint states. “Thus, sellers of leasehold interests and producing properties to entities other than defendants Chesapeake and SandRidge Energy received less value than they would have in a competitive market, despite the fact that they did not sell to Chesapeake and SandRidge Energy.”
Thieme says the class could include thousands of royalty owners in the Anadarko Basin Region in northwest Oklahoma. Leaseholders have sued Chesapeake more than 800 times in the past three years, claiming it shorted them on royalties from their oil and gas leases.
Attorney Warren Burns, with Burns Charest in Dallas, said the lawsuit “is about cleaning up the oil patch” and seeks “to promote legal competition” in the industry.
“In a rush to reap illegal profits, the defendants violated the trust and confidence of these royalty owners,” Burns said in a statement Thursday. “Their actions demonstrate that they were willing to betray my clients and violate the law.”
McClendon’s estate is not a party to the lawsuit.
Facing up to 10 years in federal prison and a $1 million fine if convicted, McClendon “pretty much drove straight” into a highway overpass Wednesday morning and died, according to Oklahoma City police.
Chesapeake, founded by McClendon in Oklahoma City in 1989, is the second-largest natural gas producer in the country. It expanded its business through hydraulic fracturing, or fracking, in major domestic shale formations, including the Marcellus Shale, spanning from West Virginia to New York, and the Barnett Shale in North Texas.
Hours before Thiele’s lawsuit was filed, federal prosecutors filed a motion to dismiss the criminal indictment against McClendon because of his death. The Justice Department’s antitrust division said Wednesday it was “saddened” to hear of McClendon’s death and offered condolences to his family.
Chesapeake spokesman Gordon Pennoyer declined to comment on the lawsuit Thursday evening.
The company said Wednesday it was “deeply saddened by the news” of McClendon’s death. His new company, American Energy Partners, said it would “continue to work hard to live up to the unmatched standards he set for excellence and integrity.”
The plaintiffs seek damages for violations of the Sherman Act.
They are also represented by Douglas Wilguess with Wilguess Garrett in Oklahoma City.

From Courthouse News.

Chesapeake Energy’s Former CEO Indicted

March 2, 2016
By David Lee
OKLAHOMA CITY (CN) – Former Chesapeake Energy CEO Aubrey McClendon, part owner of the Oklahoma City Thunder NBA team, was charged Tuesday with conspiring to rig bids on oil and gas leases.
McClendon is charged with one count of conspiring to rig bids, in violation of the Sherman Act. If convicted, he could be sentenced to 10 years in federal prison and fined $1 million.
More than 800 civil lawsuits have been filed against Chesapeake Energy in the past three years, most of them accusing the company of underpaying property owners for oil and gas royalties, according to the Courthouse News database.
Founded by McClendon in Oklahoma City in 1989, Chesapeake is the second-largest natural gas producer in the country. It expanded its business through hydraulic fracturing, or fracking, in major domestic shale formations, including the Marcellus Shale, spanning from West Virginia to New York, and the Barnett Shale in North Texas.
According to the federal indictment, he “orchestrated a conspiracy” with another oil and gas company “to not bid against each other” for leases in northwest Oklahoma from December 2007 to March 2012.
“The conspirators would decide ahead of time who would win the leases,” prosecutors said in a statement Tuesday evening. “The winning bidder would then allocate an interest in the leases to the other company. McClendon instructed his subordinates to execute the conspiratorial agreement, which included, among other things, withdrawing bids for certain leases and agreeing on the allocation of interests in the leases between the conspiring companies.”
Assistant Attorney General Bill Baer said McClendon put company profits ahead of leaseholders who should have received competitive bids for oil and gas rights.
“Executives who abuse their positions as leaders of major corporations to organize criminal activity must be held accountable for their actions,” Baer said.
The leases typically give companies the right to drill for oil and natural gas under a property for three to five years.
Chesapeake said it is “actively cooperating” with the Justice Department’s criminal antitrust investigation.
“Chesapeake does not expect to face criminal prosecution or fines relating to this matter,” spokesman Gordon Pennoyer said Tuesday evening. “Chesapeake has taken significant steps to address legacy issues and enhance legal and regulatory compliance throughout the organization.”

From Courthouse News.