Chesapeake Energy Corp. this week won its second straight legal battle over royalty payments in northern Texas’ Barnett Shale region.
A three-judge panel of the 5th Circuit Court of Appeals on Tuesday upheld a lower court ruling that sided with the Oklahoma City-based oil and natural gas company.
Royalty owners Gordon Potts and Brandy West said they were underpaid because Chesapeake deducted postproduction costs before paying the royalty. A Texas district judge previously ruled that Chesapeake was allowed to calculate “market value at the point of sale” by deducting the costs before calculating the royalty payment. The appeals court agreed.
The decision comes almost two weeks after the same three-judge panel sided with Chesapeake on a similar case in north Texas.
In that case, royalty owners Charles and Robert Warren and Abdul and Joan Javeed sued Chesapeake Exploration LLC and Chesapeake Operating Inc. for deducting post-production costs before calculating royalty payments.
The lower court dismissed the claims with prejudice, meaning the royalty owners do not have the right to sue on this issue again. The appeals court upheld the Warren’s dismissal with prejudice, but changed the Javeed’s dismissal to one without prejudice, meaning they can seek further legal action.