HomeMy WebLinkAboutResolution 4608-03-2016 A Resolution
NO. 4608-03-2016
Authorizing the Settlement of All Claims With Total E&P(USA),Inc.,and Total Gas& Power North
America,Inc.,Related to the Lawsuit in Cause No.48-268798-13,and Authorizing Execution
of All Agreements Necessary to Complete the Settlement
WHEREAS,the City of the Fort Worth has entered into oil and gas leases for the minerals underlying the
Corporation's properties and certain of those Leases are held by Chesapeake Operating, Inc. ("Chesapeake) and
Total E&P (USA), Inc. ("Total E&P")and Total Gas&Power North America, Inc. (collectively, the "Leases")as
either the original lessee or as an assignee from the original lessee;
WHEREAS, in 2013, the City, filed suit in Cause No. 48-268798-13 complaining about the lessees'
compliance with the Leases, specifically related to the calculations and amounts of royalty payment made under
the Leases;
WHEREAS,on October 22, 2013, the City Council ratified the retention of Ralph Duggins of the firm of
Cantey Hanger L.L.P. and the filing of the Lawsuit(Resolution No. 4253-10-2013);
WHEREAS, the City has reached a settlement with Total E&P and Total Gas & Power North America,
Inc., in the amount of$6,000,000.00 in settlement of the City's claims; and
WHEREAS, the settlement agreement will provide for the parties to renegotiate paragraph 2 of the gas
leases to specify pricing.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF FORT WORTH, TEXAS:
1. The City Council approves the settlement of the City claims against Total E&P and Total Gas & Power
North America, Inc.,related to the referenced lawsuit in the amount $6,000,000.00; and
2. The City Council authorizes the City Manager to execute all documents necessary to complete the
settlement and renegotiate the gases leases with Total E&P and Total Gas &Power North America, Inc.
3. The City will pay the law firm of Cantey Hanger legal fees in the amount of 33-1/3%of the total value
received by the City under the settlement($2,000,000.00 of the $6,000,000.00 settlement amount), in
addition to any actual costs and expenses incurred.
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Mary J. KQyse City Secretary
0RT WORT
City of Fort Worth, Texas
Mayor and Council Communication
COUNCIL ACTION: Approved on 3/22/2016 - Resolution No. 4608-03-2016
DATE: Tuesday, March 22, 2016 REFERENCE NO.: G-18694
LOG NAME: 12TOTAL AND TOTAL GAS AND POWER STLMNT
SUBJECT:
Adopt Resolution Authorizing Settlement of all Claims with Total E&P (USA), Inc., and Total Gas & Power
North America, Inc., Related to the Lawsuit in Cause No. 48-268798-13, 48th District Court, Tarrant
County, Texas, Authorize Execution of all Agreements Necessary to Complete the Settlement and
Authorize the City Manager to Execute Amendments to Gas Leases with Respect to Total E&P Interests
(ALL COUNCIL DISTRICTS)
RECOMMENDATION:
It is recommended that the City Council:
1. Adopt the attached resolution approving the below-described settlement of all claims against Total E&P
(USA) Inc., and Total Gas & Power North America, Inc., collectively Total, related to the referenced
lawsuit;
2. Authorize the City Manager to execute amendments to the gas leases with respect to Total E&P (USA)
Inc., interests; and
3. Authorize the City Manager to execute any other Agreements necessary to complete the settlement-
DISCUSSION:
The City of Fort Worth (City), as lessor, entered into a number of oil and gas leases with various lessees,
including Chesapeake Exploration, L.L.C. (Chesapeake), and its affiliates. In 2010, Total E&P (USA) Inc.
(Total), acquired a 25 percent working interest in the lease from a Chesapeake entity. In 2013, the City
filed suits as Cause Nos. 48-268798-13 and 352-272138-14, alleging that Total and Chesapeake
breached their obligations under those leases by underpaying royalties under the leases. The City and
Total have determined that it is in their respective best interests to resolve the lawsuit (Cause No. 48-
268798-13). The settlement provides that Total will pay the City the amount of$6,000,000.00 and
execute an amendment to each of the leases as to Total's interests to ensure that Total cannot rely on
alternative methods of calculating royalties that would lead to future underpayments.
The amendments would revise the first paragraph of Paragraph four of each gas lease to specify the
payment of royalty pricing and to prohibit the offset of royalties by any post production costs, expenses,
charges or deductions of any amount. Additionally, Total will reimburse the City for any amounts due the
City as a result of the lease amendments for January and February in accordance with the leases, as
amended. The City will grant to Total the option to take a top lease of the remaining 75 percent of the
minerals covered by the leases using the same terms and provisions that are in the amended leases
provided certain terms are met and payment is tendered to the City by Total as outlined in the Settlement
Agreement. The City will pay the law firm of Cantey Hanger 33-1/3 percent of the total value received by
the City under the settlement (or $2,000,000.00 of the $6,000,000.00 settlement amount), excluding any
actual costs and expenses incurred.
Logname: 12TOTAL AND TOTAL GAS AND POWER STLMNT Pagel of 2
The attached resolution approves the settlement and authorizes the City Manager to execute all
documents necessary to complete the settlement and execute the amendments to the gas leases with
Total.
FISCAL INFORMATION / CERTIFICATION:
Upon approval, the Director of Finance certifies that a subsequent Mayor and Council Communication will
be prepared to appropriate the funds received under this Settlement Agreement.
FUND IDENTIFIERS (FIDs):
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FROM
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CERTIFICATIONS:
Submitted for City Manager's Office by: Jay Chapa (5804)
Originating Department Head: Sarah Fullenwider (7623)
Additional Information Contact: Gerald Pruitt (7616)
Logname: 12TOTAL AND TOTAL GAS AND POWER STLMNT Page 2 of 2