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Judge OKs $119M Royalty Settlement Against Natural Gas Firm

The lawsuit claimed a that Chesapeake Energy affiliate underpaid natural gas royalties to owners.

Mnet 46749 Chesapeake Energy Logo

An Oklahoma judge has approved a $119 million settlement in a class-action lawsuit that claimed a Chesapeake Energy Corp. affiliate underpaid natural gas royalties to owners in the past decade.

A Chesapeake Energy spokesman said on Monday that the company is pleased that Beaver County District Judge Jon K. Parsley approved the settlement agreement. He said that the company looks forward to further strengthening its relationships with its Oklahoma royalty owners. The company didn't admit fault and denied that it did anything under the law in the agreement.

The judge said in his order that the settlement amount is "among the highest recoveries in the history of Oklahoma royalty underpayment class actions." He said that just three of more than 168,000 royalty owners covered under the settlement opposed it. Another 640 royalty owners opted out of the settlement class.

Royalty owners had contended that Chesapeake Operating LLC improperly deducted expenses for marketing, processing, compression and other midstream services. They said that they were owed around $313 million in unpaid royalties from 2004 to 2014, for more than 11,800 natural gas wells in Oklahoma.

Parsley said that months of mediation and negotiation led to the settlement, ensuring fairness in the process. He awarded lead attorneys in the case around 40 percent, or $47.6 million, of the settlement award for their work. He also awarded another $310,000 in litigation expenses and around $357,000 as an incentive award.

Several royalty owners opposed the award for attorney fees, but Parsley said that they failed to adequately demonstrate why the legal fees should deviate from other class-action royalty underpayment cases in Oklahoma, where the rate was around 40 percent.

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