Chesapeake Energy Corp. and Barnett Shale partner Total E&P USA agreed Monday to pay $52.5 million to settle lawsuits with more than 13,000 people who had claimed they were underpaid royalties for natural gas leases.

Oklahoma City-based Chesapeake agreed to pay $29.375 million once the court approves the tentative settlement, with another $10 million paid through a Chesapeake promissory note payable in three years. The Paris-based Total SA subsidiary agreed to pay $13.135 million in cash when the agreement is finalized. Total in 2010 bought a 25% stake in Chesapeake’s Barnett leasehold (see Daily GPI, Jan. 5, 2010).

The tentative settlement concerns lawsuits filed in 2014 and 2015 by Texas residents living in Dallas, Johnson and Tarrant counties. A “large majority” of the 13,000-plus clients “had small-acreage leases that allowed post-production deductions, unlike many of the other royalty underpayment lawsuits that have been reported,” according to the global settlement agreement. Payments will vary widely, based on each client’s production and lease language. Some plaintiffs may receive a few hundred dollars or less while other may receive several thousand dollars.

The agreement was a “mutually acceptable resolution of this legacy issue,” and management “looks forward to further strengthening our relationship with our royalty owners,” Chesapeake spokesman Gordon Pennoyer told NGI’s Shale Daily.

So many lawsuits had been filed against Chesapeake that the courts granted multi-district litigation (MDL) status, which allows a district judge to hear pretrial motions and helps defendants receive consistent rulings for similar actions. In the Chesapeake litigation, two MDL courts were established, one specifically for the Dallas-based McDonald Law Firm, which filed most of the cases.

“After three weeks of good faith mediation led by a former federal judge, the MDL No. 1 case has been resolved to our satisfaction, though it is subject to our clients’ written approval,” said plaintiff counsel George Parker Young of McDonald/Cicelli, Walter & Young. The plaintiffs attorneys “greatly appreciate the constructive approach taken by Chesapeake’s current leadership to resolve this matter.”

Ninety-percent of the plaintiffs, which represent 95% of the natural gas production since May 1, 2011, have to agree to the settlement by July 11 or it may be canceled by Chesapeake and Total.

“Full disclosures are going out this week to those clients, and all of them will have an opportunity to review the entire settlement agreement and have their questions answered before consenting,” counsel said.

“The parties negotiated a two-year standstill into the future, and during that period, the clients’ underpayment or nonpayment of royalty claims, if they have any, will accrue. The parties wanted to give Chesapeake and Total an opportunity to continue their efforts to lower their post-production costs, possibly mooting any future potential claims, if any.”

Hundreds of lawsuits have been filed against Chesapeake regarding royalty underpayments in the Barnett, Eagle Ford Shale and other areas around the country. The producer has settled several underpayment cases in the Fort Worth area brought by residents, city councils and school boards for allegedly not abiding by the terms of gas lease contracts (see Shale Daily, March 23; Aug. 21, 2014; March 22, 2013).

The new settlement does not impact pending lawsuits filed in March in Tarrant County against Chesapeake on behalf of Eagle Ford Shale landowners that claim the producer and its partner Chinese National Offshore Oil Co. underpaid royalties on wells covering 30,000 acres (see Shale Daily, March 11).

The Fort Worth City Council also is scheduled to vote Tuesday to approve a resolution authorizing an out-of-court settlement with Chesapeake regarding a royalty underpayment lawsuit. The council also is to vote on amending gas leases in the Barnett with Chesapeake and Oklahoma City-based Dorchester Resources, formerly Arcadia Resources. Arcadia was a holding company for the late Aubrey McClendon, who was Chesapeake CEO when the Barnett leases originally were completed.