Barnett Shale

Venue fight underway as Burleson residents sue Chesapeake Energy

Chesapeake Energy, which is fighting a lawsuit filed by Burleson property owners who claim the company illegally reneged on a lease agreement that would have benefited 408 households, wants to have the case heard in a Dallas federal court. But the property owners filed the lawsuit July 20 in the 18th State District Court in Cleburne and want venue to be there. Burleson is in far northern Johnson County.

Chesapeake contends the proposed class action lawsuit should be in federal court in part because the Class Action Fairness Act authorizes such jurisdiction for class actions with more than $5 million at stake. Chesapeake, represented by the prominent Fort Worth law firm of Kelly, Hart & Hallman, notes that the lawsuit seeks nearly nearly $6.7 million just for lease bonuses.

 Another well-known Fort Worth law firm, Whitaker, Chalk, Swindle & Sawyer, represents two named plaintiffs, Leslee Dawn Ahrend and Buster Ray Williams, and wants the lawsuit to be declared a class action that would include the hundreds of Burleson properties that would have benefited from a lease agreement reached in 2008 between representatives of Chesapeake and an alliance of homeowners .

Under the agreement, property owners would have received a lucrative lease bonus of $27,200 per acre and a 25.25 percent royalty, the lawsuit states. It contends that Chesapeake was guilty of breach of contract in aborting the agreement by refusing to sign lease agreements with individual property owners based on the terms of the agreement. The plaintiffs cite a letter, dated Oct. 16, 2008, that a senior landman representing Chesapeake sent to representatives of Burleson homeowners. The landman said that, as a result of the deep economic recession and plunging natural gas prices, Chesapeake was "withdrawing previous offers to lease your minerals." The ,lawsuit contends that Chesapeake this year has offered a lease bonus of only $1,000 an acre and a 25 percent royalty.

See story in Wednesday's Star-Telegram.

--Jack  Z. Smith   

Lawyers address neighborhood regarding aborted gas leases

An attorney told a southwest Fort Worth neighborhood association Tuesday night that a litigation group formed by three Dallas law firms might seek hundreds of millions of dollars in damages against energy companies that reached lease agreements with alliances of neighborhood associations, but then declined to enter into individual lease contracts with many property owners.

"The promises they (energy companies) made to Fort Worth were maybe $150 million," attorney Kip Petroff told members of the Meadows of CandleRidge Neighborhood Association who packed a meeting at a Knights of Columbus hall. Petroff said the companies could be sued for triple damages, plus attorneys' fees, under provisions of the Texas Deceptive Trade Practices Act.

The litigation group has filed a lawsuit in Dallas on behalf of an Arlington couple, Willie and Carmen Booth, that it contends is due a lease bonus of nearly $5,000 from XTO Energy as a result of an agreement that the South East Arlington Coalition of Texas, an alliance of neighborhoods, reached for lease bonuses of $26,517 per acre. The Meadows of CandleRidge association was part of the Southwest Fort Worth Alliance, which reached an agreement with Vantage Energy for lease bonuses of $27,500 per acre. Meadows of CandleRidge Association President Eva Bonilla stressed Tuesday night that the organization was not endorsing the litigation group's legal effort, but only allowing it to hold an informational session.

The energy companies sued by the Booths are expected to contend that they were not bound to pay lease bonuses negotiated with alliances of homeowner groups unless the companies had entered into binding lease contracts with individual property owners.

Read more about this in Thursday's Star-Telegram.

--Jack Z. Smith

Trickle-down from bonuses benefits charities

Last week saw an end to the frenzy of mineral-rights leasing that enthralled Tarrant County during the past year but maybe not to charitable contributions tied to the Barnett Shale boom. On Oct. 16, more than 300 people attended 360Northwest Gives Back at Delaney Vineyards and Winery in Grapevine. And South Burleson’s Community of Gas Lease Holdouts on Oct. 23 donated $12,000. to the Harvest House in Burleson, a community distribution center for the needy

At the 360Northwest affair, a raffle and silent auction, boosted by a $10,000 grant from Chesapeake Energy, resulted in $25,000 in contributions that will be split between GRACE and FBC Euless Freestone Housing Revitalization Project. GRACE provides food, clothing and other assistance to residents facing financial challenges. FBC Euless Freestone is a collaboration of the city of Euless, First Baptist Church of Euless, Restoration Church and Life Connection Church that repairs and updates homes for needy residents. Dan Delph, lead organizer of the charity event, said the turnout "exceeded our greatest expectations." Chesapeake’s Leah King said it was the first time the company is aware of that a neighborhood leasing group came together to share part of lease bonuses with a not-for-profit organization. 360Northwest Coalition, representing more than 3,400 property owners and 1,500 acres in Euless and Grapevine, endorsed a mineral-rights lease from Chesapeake in July that paid a bonus of $23,500 an acre and a 25 percent royalty.

In Burleson, the all-volunteer Holdouts group, headed by Bill Mahanay and his wife, Pat, collected fees of $25 to $100 to cover expenses such as advertising, legal and accounting fees. And from the beginning, Mahanay stated that any funds left over would be given away to charity. The major portion of the remaining funds were given Thursday night to Harvest House at the City Council meeting at the Burleson City Hall. Smaller amounts will be distributed to the five churches who helped the group achieve their goal of a fair market price for leases in the area. The resulting lease bonus of $27,200 per mineral acre was more than 18 times the amount originally offered when the group began in the
fall 2007.

Chesapeake also pledged $500,000 to Benbrook on Saturday toward expansion of the Benbrook Community Center and YMCA. The company gave the first $100,000 of that commitment to the city at the second annual Heritage Fest, which celebrates the city’s incorporation in 1947.

Chesapeake’s Julie Wilson said the company’s contribution recognizes "the importance to expand the often-cramped quarters of the Community Center/YMCA, a popular workout facility and meeting place that is also used as a needed shelter in times of emergencies."

-- Jim Fuquay

Big SW Fort Worth lease deal suspended

Vantage Energy, which just weeks ago agreed to one of the largest single leasing deals of the urban leasing boom, says it is not signing new leases with the big Southwest Fort Worth Alliance group because of the drop in natural gas prices and turmoil in financial markets. The Denver-based firm, privately funded by three investment firms, said it will honor any drafts it previously issued, which some observers estimate at about half the landowners in the Alliance, which covers more than 20 neighborhoods north and south of Interstate 20. Vantage issued an apology and explanation of its actions this morning, which is available at the  Alliance web site or which can be downloaded here: Download vantagealliance_letter.pdf

"We are trying to make the best of a bad situation," said Vantage executive John Wehrle. He said the company has "tens of millions of dollars" invested so far in the Alliance area. He said the company intends to remain active in the Barnett Shale, but probably at lesser financial terms. "We still have our original commitments lined up" from private equity firm Riverstone and two other investors, Wehrle said. "But we're being told, 'Hey guys, it's a new market and new environment. We can't spend that anymore.' " Wehrle declined to discuss other Vantage deals in the Barnett Shale, such as its recent agreement with Titan Operating and two big Grand Prairie negotiating groups. Vantage and Titan share Riverstone as a common investor but otherwise are separate companies, both firms have said.

--Jim Fuquay

Burleson groups, Chesapeake reach record $27,200/acre deal

Two big Burleson property owners groups have jointly accepted Chesapeake Energy's leasing offer of $27,200 per acre and a 25.25 percent royalty, organizers say. The central Burleson and south Burleson groups together represent upwards of 2,000 acres, including school district and city property, said Carter Mahaney of Burleson Community of Gas Lease Holdouts, the south side group. The other group is the Central Burleson Holdouts. Also bidding was XTO Energy, which offered $22,000 an acre and a 25.5 percent royalty, Mahaney said.

Mahaney said Chesapeake told the groups it has secured several drill sites capable of reaching much of the city, which is partly in southern Tarrant County and mostly in northern Johnson County, the two most productive counties in the Barnett Shale field. He said the groups will rely in the city's recently modified drilling ordinance to provide major environmental and safety protections. Mahaney said his group will continue to accepting members through May 15, and he hopes lease signing will be completed by the end of June.

-- Jim Fuquay

CATS endorses Titan Resources/Caffey contract

CATS, the southwest Arlington group representing homeowners immediately east of Lake Arlington, said Monday it endorsed a lease with Titan Resources/Caffey Group and will hold informational meetings at 4 p.m. and 6 p.m. Monday at St. Vincent de Paul Catholic Church, 5819 W. Pleasant Ridge Dr. The CATS lease pays a $26,000/acre bonus and 25.5 percent royalty for a 3-year term (and a commitment to drill within 30 months), said organizer Jim MacDowell. He said the extra half-point royalty came from the owner of a planned drill site, near Bowman Springs and Shorewood, who contributed a portion of his override on the lease. Titan is affiliated with Hollis R. Sullivan, MacDowell said. He said the deal was the outcome of discussions with five parties that eventually came down to Titan and Paloma Resources, acting on behalf of Chesapeake Energy.

-- Jim Fuquay

SE Arlington group backs record lease with XTO Energy

A big southeast Arlington neighborhood group said Friday it has endorsed a lease with XTO Energy that will pay the area’s highest signing bonus yet reported, $26,517 an acre, along with a generous royalty of 26.5 percent. Mark Middleton, an organizer of South East Arlington Communities of Texas (SEACTX), said the group on April 1 actively started seeking bids to lease the mineral rights of roughly 6,000 acres covered by about 20 neighborhoods in the group. It reached agreement with Fort Worth-based XTO Thursday afternoon, Middleton said. SEACTX also drew interest from Chesapeake Energy, Devon Energy and Antero Resources Barnett Corp, he said. Chesapeake is the busiest driller in the Barnett Shale, while Devon is the biggest producer but has mostly stayed out of the urban area. Antero sold its Barnett Shale properties to XTO in early 2005, but recently re-entered the play, Middleton said.

Middleton said he understands that among the drillers, only Chesapeake had secured a drill site, located just south of Seguin High School. But property owners committed to sign with XTO virtually surround that site, and he expects the two big competitors to work out a deal to give XTO use of the site.
XTO and Chesapeake representatives could not be reached for comment late Friday.

SEACTX extends mostly south and east of Arlington Municipal Airport. Click here to view the group's map of its boundaries.

-- Jim Fuquay

Devon, Chesapeake execs talk leasing at conference

Top executives at Devon Energy and Chesapeake Energy, two of the biggest players in the Barnett Shale, bemoaned the high cost of getting leases in the Barnett Shale at a New Orleans investment meeting, reports Reuters news service. Chesapeake Chairman Aubrey McClendon, speaking to reporters at the Howard Weil  Energy Conference, called the escalating bonus payments "a discouraging trend," adding that "luckily, the costs of acquiring acreage are generally not a meaningful part of your overall cost equation."

"We are amazed at the royalty rates and bonuses that some people are paying to get into the area," Devon Chairman Larry Nichols told Reuters. Devon got into the play with its 2001 acquisition of Mitchell Energy, the Barnett Shale's pioneer, and expanded that in 2006 with its purchase of Chief Oil and Gas. It has stayed mostly in rural areas, unlike Chesapeake, which has jumped headlong into the most densely populated portions of the play.

-- Jim Fuquay

Signing meetings for Little Green Ark neighborhoods

Lease signing meetings are being held tonight ( Monday, 3/24 ) and next Monday (3/31 ) at Lake Arlington Baptist Church for residents of portions of the Little Green Ark neighborhoods of southwest Arlington. Hours are from 5:30 p.m. to 8 p.m.

The specific neighborhoods signing at these meetings include:

• Alexander Place -  All property owners on Sausalito Drive
• Greenwood Hill Addition - Property owners from 4606 Lester Dr. thru 4717 Lester Dr.;  all property owners of Ironwood Ct. and Basswood Ct.
• Oak Valley Estates -  All property owners of Oak Valley Dr.; property owners from 2800 Bonneville Dr. thru 4904 Bonneville Dr.
• Quail Hollow On The Lane Addition - Property owners on all streets
• Whisperton Addition - Property owners on both streets
• Wooded Acres Addition - Property owners on all streets

Neighborhood representatives agreed last week to terms of a standard mineral rights leasing offer for area residents and landowners with Paloma Resources, including a $22,000 per acre signing bonus and 25 percent royalties.

Residents are asked to bring official identification, such as a driver license.  Married couples and multiple owners listed on a deed must attend together.

Lease signing dates for other property owners in the area will be announced soon.

-- Bob Cox

(Photo: WinterFest at Lake Arlington Baptist Church)

$22,000 offer for Little Green Ark (SW Arl) owners

An e-mail going out today to residents in the Little Green Ark area of southwest Arlington says Paloma Resources, working on behalf of Chesapeake Energy, has extended a $22,000 an acre gas lease offer to  property owners.

The offer, according to a neighborhood organizer, will be exte nded to all residents of the newly expanded area which includes residents of the areas bordered by Arkansas on the north, Little Road on the east and Green Oaks on the west south to about Pleasant Ridge.

The same offer is being extended to residents of the Murwick Area Neighborhood Association (MANA), an area east of Little Road and south of Mayfield.

Primary points of the offer are:

• $22,000 per acre signing bonus;
• 25% no-cost royalty;
• 3 year lease, with a 2 year option to extend, at a bonus amount equal to the bonus paid ($22,000/acre) for the initial lease;
• Property owners to be paid by 10-business-day vouchers, to be exchanged for checks after the 10th business day, payment subject to approval of title.

- Bob Cox

(Photo: Diabetes walk-a-thon at Ditto Elementary)