Chesapeake Energy faces a state lawsuit over royalties that a state commission claims have been underpaid.The suit was filed Friday in Roger Mills County District Court by the Commissioners of the Land Office, also known as the School Land Trust. The commission, which manages federal trust and assets, claims the Oklahoma City-based company has not paid it the proper amount of royalties.
Chesapeake officials declined comment on the lawsuit.
"We generally don't discuss active legal issues except in the proper venue, where we will effectively defend the company's position," said Henry Hood, the general counsel and senior vice president of land and legal for Chesapeake, the largest producer of natural gas in the U.S.
Like other energy companies, Chesapeake has wells on trust land managed by the commission. The profit from mineral leases and land sales helps fund public education.
The lawsuit claims that Chesapeake owes additional royalties from its sale of oil and gas collected from wells on trust-managed land. It also said that Chesapeake should not deduct post-production costs from its royalty payments.
"Defendants have taken ... actions designed to unjustly enrich defendants and to increase defendant's profits at the expense of the CLO," the commission said in the lawsuit.
Court documents indicate that the commission thinks Chesapeake owes it more than $10,000, but the lawsuit doesn't list a specific amount.
James Dupre, an attorney for the land office, said that since 1987, it has audited accounts of the lease holders in an effort to make sure the commission receives the proper amount of royalties from oil and natural gas wells.
Such income provides about 69.2 percent of the amount the land office distributed to common education in 2007.
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