Chesapeake Royalty Owners Lawyer Up

http://www.cleburnetimesreview.com/local/x864252441/Chesapeake-roya...

An estimated 180 people turned out on Tuesday evening to hear a Fort Worth attorney tell them how to win back royalties he said Chesapeake Energy Corp. has improperly withheld. 

“All of you in this room put them in business in Johnson County,” trial lawyer Dan McDonald said to the crowd at the Cleburne Conference Center. “How do they treat all of us that put them in business? Pretty shabby: pretty doggoned shabby.”

Bob Hurt, who lives near Crowley, decided to become a party to a lawsuit against the Oklahoma energy giant.

“We’re in the same boat as everybody else is,” he said, referring to Chesapeake. “They just do what they want.”

The battle centers over expenses that McDonald, who is himself a disgruntled Chesapeake lessor, says the company improperly withheld when it got into financial trouble after energy prices plunged.

He laid the blame at the feet of former Chesapeake CEO Aubrey McClendon, once America’s highest paid corporate chief. 

On a screen McDonald displayed a 2011 Forbes magazine cover identifying McClendon as “America’s Most Reckless Billionaire.”

The article summed up McClendon’s wild ride up that point thusly: 

“He is without a doubt the most admired — and feared — man in the U.S. oil patch,” Forbes wrote. “But he’s also the most reckless, the alpha wildcatter with an off-the-charts risk tolerance. It proved nearly fatal in 2008, when extreme leverage, aggressive financing and plunging oil and gas prices combined to crush Chesapeake shares by 80 percent. McClendon was forced to sell nearly all of his own shares to meet margin calls. The company had to write down billions.”

Those financial troubles prompted the company to start deducting expenses that other companies weren’t, McDonald said. 

“Aubrey McClendon made an enormous bet that gas prices were going to rise,” McDonald said, noting that between 2004 and 2012, “Chesapeake spent $30 billion more than they took in. Much of it was borrowed.”

- See more at: http://www.cleburnetimesreview.com/local/x864252441/Chesapeake-roya...

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Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on July 26, 2014 at 5:46

Considering that Mr. McDonald is a Personal Injury specialist, I hope he has, or will obtain, co-counsel experienced in energy law and O&G litigation.  It's relatively easy to convince outraged mineral lessors to sue.  What is difficult is  prevailing in long and costly litigation. To the best of my knowledge the Personal Injury lawyers or firms that have taken cases to court here in the LA Haynesville Shale have failed to win a case or a settlement. 

Permalink Reply by Kevin Dentzer on July 28, 2014 at 8:39

Skip is correct about the degree of expertise necessary to argue the royalty clause in a Texas Court but Skip may also be thinking in terms of an absolutely ridiculous opinion handed down by, I believe the LA Sup Ct that took the addendum to a lease and gutted the added royalty language meant to protect the royalty owner from added costs and burdens. I believe Chesapeake was the operator.  Hoping the Texas Courts don't follow the LA line of reasoning..  

Also surprised that the Royalty Owner isn't seeing more support in this discussion considering Chesapeake's well earned reputation.

If the royalty owner looses in the Hyder case it is time to turn out the entire Texas Court.

Permalink Reply by Skip Peel - Mineral Consultant on July 28, 2014 at 9:14

I'm all for fairness to land/mineral owners.  It's the foundation of my business.  I counsel a pragmatic, as opposed to angry, approach to the consideration of litigation and a requirement for the services of an experienced O&G attorney or firm.  An experienced and ethical O&G attorney will be blunt in assessing the chances of success - the time and the cost.  They look for cases with the right ingredients.  The good ones will often decline to take a case that doesn't have those ingredients even if the potential plaintiff is adamant.  As soon as I read that this is a suit by a personal injury attorney my concern is for the plaintiffs.  I think the chance of prevailing in court is small and their chance of spending a good bit of money and getting a poor outcome is high.

Permalink Reply by Franks on July 26, 2014 at 14:07

   With CHK settling very quickly out of court in nearly every article I've seen lately, I'd imagine this ambulance chaser attorney may have assumed the same. 

Permalink Reply by Skip Peel - Mineral Consultant on July 26, 2014 at 14:49

I must have missed those articles, could you post links to some.

Permalink Reply by Franks on July 26, 2014 at 17:22
Permalink Reply by Franks on July 26, 2014 at 22:03
Permalink Reply by Skip Peel - Mineral Consultant on July 27, 2014 at 1:54

Maybe I was not clear.  Sorry.  I was looking for cases over royalty payment deductions that were settled. 

Permalink Reply by w.r. frank on July 27, 2014 at 5:38
I am not aware of any settlement. CHK lost the Hyder lawsuit in the Texas Supreme Court. I have reviewed the pleadings in many of these cases and it would appear that CHK deducts no matter what the lease language says.
Permalink Reply by Skip Peel - Mineral Consultant on July 27, 2014 at 5:46

I can't find anything on a Supreme Court ruling, only on the appellate verdict.

Permalink Reply by Two Dogs, Pirate on July 27, 2014 at 6:43

David J. Drez, III and family owned minerals on a small tract in a prospect I was working last year. The first words I said to him were to congratulate him for beating Chesapeake in the lower court.

Permalink Reply by w.r. frank on July 29, 2014 at 8:37

Skip, my mistake! I should have checked instead of relying on my faulty memory. It was TX Court of Appeals.

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