The Fort Worth City Council on Tuesday will vote on settling a lawsuit in which it claimed Chesapeake Energy Corporation cheated taxpayers out of millions of dollars in royalties for natural gas it drilled under city land.
It is not immediately clear how much the proposed settlement is worth.
A notation on the council agenda said the terms will be made public but did not specify when.
A similar case, also filed in 2013 against Total E&P USA, a unit of the French energy giant, settled in March for $6 million.
The Chesapeake settlement could be even larger because Total owned just 25 percent of the city’s leases, which it bought from Chesapeake in 2010.
According to the lawsuits, Chesapeake and Total operated several hundred wells which produced more than 200 billion cubic feet of natural gas from Fort Worth-leased lands since production started in 2006.
Under the deal, Fort Worth was supposed to receive royalties of 25 percent to 27.5 percent of the natural gas sold or its market value, whichever was higher.
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But the lawsuits claimed the companies improperly deducted costs of production, transportation and other expenses even though the contract specifically forbid it.
In the lawsuit against Chesapeake, the city said the Oklahoma City-based company in effect rigged the books by using “sham contracts” with its own affiliated companies.
Chesapeake denied any wrongdoing and fought the lawsuit but recently offered a settlement.
While the dollar figure is still under wraps, a private law firm hired by the city already knows the cut it will get. The firm, Cantey Hanger, will be paid 33 percent of the total cash payment, plus expenses.
Chesapeake faces hundreds of similar lawsuits from property owners and other governments and has settled several other major disputes, including ones with DFW International Airport and the Fort Worth Independent School District.
The company’s value has plummeted with the decline of natural gas prices.
In the first three months of 2016, Chesapeake reported a net loss of $964 million and a revenue decline of 39 percent compared to the same period in 2015.
