HomeMy WebLinkAboutResolution 4633-05-2016 A Resolution
NO. 4633-05-2016
Authorizing the Settlement of All Claims With Chesapeake Energy Corp.,Chesapeake Operating L.L.C.,Chesapeake
Exploration L.L.C.,Chesapeake Energy Marketing,Inc.,and Dorchester Resources, L.P.,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 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"), Dorchester
Resources, L.P. ("Dorchester"), 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 Chesapeake and Dorchester in the amount of fifteen million
dollars($15,000,000)in settlement of the City's claims;and
WHEREAS,the settlement agreement will provide for the parties to renegotiate their 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's claims against Chesapeake and Dorchester related to the
referenced lawsuit in the amount of fifteen million dollars($15,000,000)to paid to the City by May 31,2016 and for
production going forward the calculation of royalties for production will be based upon Houston Ship Channel Index
without direct or indirect reduction for any and all post production costs and expenses;and
2. The City Council authorizes the City Manager to execute all documents necessary to complete the settlement and
renegotiate the gas leases with Chesapeake and Dorchester;and
3. The City will pay the law firm of Cantey Hanger, L.L.P., legal fees in the amount of 33-1/3% of the total money
received by the City under the settlement($5,000,000),plus any actual costs and expenses incurred as full and final
payment of any and all attorney fees.
Adopted this 24th day of Mav• 2016. �, Q°Q4y>?4
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ary J. Kayser, City xA
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City of Fort Worth, Texas
Mayor and Council Communication
COUNCIL ACTION: Approved on 5/24/2016 - Resolution No. 4633-05-2016
DATE: Tuesday, May 24, 2016 REFERENCE NO.: G-18745
LOG NAME: 12CHESAPEAKE ENERGY STLMNT
SUBJECT:
Adopt Resolution Authorizing Settlement of All Claims with Chesapeake Energy Corp., et al., 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 Chesapeake's and Dorchester's Interests (ALL COUNCIL
DISTRICTS)
RECOMMENDATION:
It is recommended that the City Council:
1. Adopt a resolution approving the settlement of all claims against Chesapeake Energy Corp.,
Chesapeake Operating L.L.C., Chesapeake Exploration L.L.C., Chesapeake Energy Marketing, Inc.
(collectively Chesapeake), and Dorchester Resources, L.P. (Dorchester), related to the referenced
lawsuit;
2. Authorize the City Manager to execute amendments to the gas leases with respect to Chesapeake's
and Dorchester's 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 E&P) acquired a 25 percent working interest in the lease from a Chesapeake entity. In 2013, the
City and related entities filed suits as Cause Nos. 48-268798-13 and 352-272138-14, alleging that Total
E&P and Chesapeake breached their obligations under those leases by underpaying royalties under the
leases. On March 22, 2016, City Council adopted Resolution No. 4608-03-2016, approving the settlement
of all claims against Total E&P for $6,000,000.00.
The City and Defendants Chesapeake and Dorchester have determined that it is in their respective best
interests to resolve the lawsuit (Cause No. 48-268798-13). The City will pay the law firm of Cantey
Hanger 33-1/3 percent of the total cash payment received under the settlement, plus expenses.
A resolution will be distributed to the City Council and public outlining the terms of 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 Chesapeake and Dorchester.
FISCAL INFORMATION /CERTIFICATION:
Upon approval, the Director of Finance certifies that a subsequent Mayor and Council Communication will
Logname: 12CHESAPEAKE ENERGY STLMNT Pagel of 2
be prepared to appropriate the funds received under this Settlement Agreement.
FUND IDENTIFIERS (FIDs):
TO _
Fund Department ccoun Project Program ctivity Budget Reference # moun
ID ID Year (Chartfield '21 i
FROM
Fund Department ccoun Project Program ctivity Budget Reference # moun
ID ID Year Chartfield 2
CERTIFICATIONS:
Submitted for City Manager's Office by: Jay Chapa (5804)
Originating Department Head: Sarah Fullenwider (7623)
Additional Information Contact: Gerald Pruitt (7616)
Logname: 12CHESAPEAKE ENERGY STLMNT Page 2 of 2