HomeMy WebLinkAboutResolution 4698-11-2016 A Resolution
NO. 4698-11-2016
Authorizing the Settlement of All Claims with Parallel Petroleum,L.L.C.,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
City'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. Parallel
Petroleum,L.L.C.,(Parallel)acquired a working interest in a portion of those leases;
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 filing of the Lawsuit (Resolution No.
4253-10-2013);
WHEREAS, the City previously reached settlements with Chesapeake, Total E&P, and Dorchester in
settlement of the City's claims; and
WHEREAS, the settlement agreements provided for the parties to renegotiate their gas leases to specify
pricing;
WHEREAS,Parallel has agreed to the same lease terms as Chesapeake.
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 Parallel related to the referenced
lawsuit and 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 Parallel.
Adopted this 151h day of November, 2016. oobduuq�
ATTEST: p
J °°
a0
o I�a
i0
,
�°By: 0� °° 04L XY Lo' °
Mary J. Ka , 0
o$°4pp
ORTWO T
City of Fort Worth, Texas
Mayor and Council Communication
COUNCIL ACTION: Approved on 11/15/2016 - Resolution No. 4698-11-2016
DATE: Tuesday, November 15, 2016 REFERENCE NO.: **G-18878
LOG NAME: 12CHESAPEAKE ENERGY STLMNT-PARALLEL
SUBJECT:
Adopt Resolution Authorizing Settlement of All Claims with Parallel Petroleum, L.L.C. 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 Parallel Petroleum Interests (ALL COUNCIL DISTRICTS)
RECOMMENDATION:
It is recommended that the City Council:
1. Adopt a resolution approving the settlement of all claims against Parallel Petroleum, L.L.C. related to
the referenced lawsuit;
2. Authorize the City Manager to execute amendments to the gas leases with respect to the interests of
Parallel Petroleum, L.L.C.; 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. On May 24, 2016, City Council adopted Resolution
4633-05-2016, approving settlement of all claims against Chesapeake Energy Corp., et al., in Cause No.
48-268798-13 and paid the agreed upon amount of$15,000,000.00. All parties to the lawsuit executed
the Settlement Agreement documents with the exception of Parallel Petroleum, L.L.0 (Parallel). Parallel
acquired a working interest in City leases. Parallel has subsequently agreed to the terms of the settlement
and will execute all documents necessary to complete the settlement.
The City has been paid all agreed upon amounts due under the terms of the Chesapeake and Total E&P
Settlement Agreements so no further settlement payments are due by Parallel, however, Parallel will now
comply with the terms of the settlement which require royalty payments based on a natural gas price
index. Additionally, Parallel will pay the City for any underpayments of royalty from the effective date of
the Settlement on April 1, 2016.
FISCAL INFORMATION / CERTIFICATION:
Upon approval, the Director of Finance certifies that this action will provide continuity with our Gas Lease
Logname: 12CHESAPEAKE ENERGY STLMNT-PARALLEL Page 1 of 2
Agreements and that a minimal financial impact is expected.
FUND IDENTIFIERS (FIDs):
TO
Fund Department ccounj Project �Program ctivity Budget Reference # moun
ID ID Year (Chartfield 2)
FROM
Fund! Department ccounj Project �Program ctiiviity Budget Reference # mounl
ID ID Year (Chartfield 2)
CERTIFICATIONS:
Submitted for City Manager's Office by: Jay Chapa (5804)
Originating Department Head: Sarah Fullenwider (7623)
Gerald Pruitt (7616)
Additional Information Contact: Jean Petr (8367)
Logname: 12CHESAPEAKE ENERGY STLMNT-PARALLEL Page 2 of 2