Dallas/Fort Worth (DFW) Airport Settlement Documents Receive Final Approval from the Dallas City Council

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Fort Worth, Texas based Law Firm, Moses, Palmer & Howell helps bring an end to over three years of litigation involving an oil and gas lease on DFW Airport property.

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This settlement is very favorable to the DFW entities.

Settlement documents for the Dallas/Fort Worth Airport’s royalty lawsuit against Chesapeake Exploration recently received final approval from the Dallas City Council. The airport board and the Fort Worth City Council previously approved the settlement documents. The settlement brings an end to over three years of litigation related to an oil and gas lease the airport and its owner cities of Dallas and Fort Worth awarded to Chesapeake in October 2006. According to court documents the lease covers over 18,000 acres at the airport and is one of the largest in the Barnett Shale.

The airport and its owner cities are represented in the lawsuit by Shayne Moses and David Palmer of the Fort Worth based law firm Moses, Palmer & Howell, L.L.P. The lawsuit originally involved two sets of claims. One set of claims involved the manner in which Chesapeake configured “retained tracts,” which are defined in the lease as the lands Chesapeake holds or “earns” with each well it drills. The retained tract claims were previously settled and resulted in an amendment to the lease defining how Chesapeake is to structure retained tracts. The settlement also included a payment by Chesapeake to reimburse a portion of the airport’s legal fees, among other things.

The second set of claims, concerned the prices and volumes of gas on which Chesapeake was paying royalties to the airport. Documents filed in the lawsuit allege the airport had been underpaid millions of dollars in royalties since Chesapeake first produced gas under the lease in September 2007. According to court documents the lease required Chesapeake to pay royalties on the higher of the proceeds it received for the sale of gas produced from the airport or the highest market price paid for gas in comparable sales in the Barnett Shale. Among other things, the royalty settlement guarantees the airport will receive over $5.3 million in additional royalties through the end of 2012 and establishes a set formula for calculating royalties thereafter. According to court documents the formula is based upon a published index price with defined adjustments depending upon the price of gas at the time the royalties are calculated. According to court documents DFW’s future royalty payments will be based upon the higher of proceeds received and the agreed upon formula.

“This settlement is very favorable to the DFW entities,” said Mr. Moses. “Not only does it compensate them for significant past underpayments, it provides certainty as to how Chesapeake must calculate royalties going forward. History suggests that the agreement reached regarding how future royalty payments will be calculated should result in millions of more dollars of income to DFW over the life of the lease. Though it took many years and much effort to reach this point, we are pleased with the result because it protects the public interest by assuring that the airport and its owner municipalities will be paid what they are truly owed in the future.”

While the lawsuit remains pending in Tarrant County, it was removed from the trial docket in September when a tentative settlement was reached. The settlement calls for the lawsuit to be dismissed now that it has received final approval. Various minority-owned businesses that hold working interests in the airport lease were originally parties to the lawsuit. Those businesses non-suited their claims and ceased to be involved in the airport lawsuit some time ago.

About Moses, Palmer & Howell, L.L.P.
Moses, Palmer & Howell is located in the Oil and Gas Building at 309 West 7th Street in downtown Fort Worth. In addition to the named partners, the firm has four other attorneys, Whitney Cardwell, Brandon Edmundson, Alyson Halpern, and Tawanna Cesare. The firm’s main areas of practice include oil and gas, business and commercial litigation, banking matters, real estate, commercial lending and family law.

Moses, Palmer & Howell, L.L.P. is a member of the International Society of Primerus Law Firms.

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