By Leonie Wood
BHP Billiton is under pressure again in the US courts over its shale production ventures in the Midwest with landowners in Arkansas now claiming energy companies are short-changing them.
BHP and other energy companies in eastern Arkansas have been peppered with class actions in the past year as local residents claim that the drilling injection of liquids into underground shale formations, a process known as fracking, has caused tremors and damaged the environment.
Some landowners now are contesting how much they are being paid for leasing the land for fracking and gas production.
But some landowners now are contesting how much they are being paid for leasing the land for fracking and gas production.
In the latest class action, filed in June, a couple from eastern Arkansas have accused five energy companies, including BHP, of wrongfully deducting from their royalties the costs of extracting and transporting gas produced on their land.
The legal stoush comes amid speculation that BHP will write down the value of the $US4.75 billion of shale gas assets it acquired early last year from Chesapeake by at least $2 billion.
The impairment charge, which could come within weeks, would recognise the slide in US gas prices amid a glut in production.
BHP paid $US15.1 billion for Petrohawk's shale gas assets in August 2011, but it is not expected to write down these assets until 2013.
In documents filed in the US District Court in eastern Arkansas, Denny and Diane Brown say the original lease agreement they struck with Basin Management in 2005 calculated the royalties to be paid to landowners on a gross basis.
But they say the energy companies are wrongfully deducting costs that the companies claim are part of the process of "enhancing" the value of the gas.
The Browns claim XTO Energy, which operates the facilities on their land, Basin Management, Chesapeake and BHP have "wilfully withheld payments without just cause or through bad faith".
Basin assigned the Browns' lease to Chesapeake Exploration, and Chesapeake later pooled its assets in the region with XTO Energy and BP America Production. BHP acquired Chesapeake's assets in early 2011.
Disputes over royalties contracts are not new in the fracking industry, but the Browns want their case widened to include other landowners in Arkansas whose leases have similar terms.
In a statement issued to BusinessDay, BHP said it hoped the matter would be resolved quickly.
"We can confirm that BHP Billiton has been named in a class action lawsuit regarding royalty payments associated with oil and gas development of the Fayetteville Shale in Arkansas," BHP said.
"The determination of royalty payments is defined in the lease agreements. BHP Billiton honors the terms of the lease agreements and we prefer to work with the royalty owner to resolve any disagreement over interpretation."