BHP's shale division faces claims
BHP Billiton's controversial shale division is set to be dragged back into the US court system as two new legal claims target damages payments that could run into the millions of dollars.
The two claims were lodged in the Arkansas court system this month, and focus on contentious issues surrounding royalty payments to landowners and a series of seismic events that coincided with fracking activities run by BHP subsidiary Chesapeake Energy.
BHP has previously been taken to court in Arkansas by other plaintiffs raising similar complaints, and the two claims - lodged separately on March 6 and March 11 - suggest both issues could continue to plague the company.
The more financially significant claim, which seeks more than $US5 million in damages, is a class action that alleges landowners have been underpaid royalties for hosting shale wells. The claim says a group of companies that both produce and market gas - namely BHP, Chesapeake, BP and Arkansas Midstream - entered into sales arrangements that resulted in "a fraudulent scheme" that reduced the amount of royalties paid to landowners.
The plaintiffs claim this was done by a variety of methods, including intentionally reporting false information around the quantities of gas sold, deduction of fees, taking gas from wells that was never reported and several other "improper deductions".
A similar claim was lodged in Arkansas courts last July, when plaintiffs Denny and Diane Brown claimed BHP and XTO Energy "wilfully withheld" royalty payments.
BHP's Melbourne office was unable to offer further context to the new legal claim on Tuesday, but reiterated previous declarations that the company honours the terms of its lease agreements, and prefers to work with landowners to resolve disagreements.
The second new claim, lodged in the Little Rock division of the US District Court, involves a claim for at least $US75,000 damages from two married couples living in the Arkansas town of Greenbrier. Both couples live about 1½ kilometres from the epicentre of an earthquake that registered 4.7 on the Richter scale in February 2011, and the claim links disposal wells in the fracking process to seismic activity in the area.
That link has not been definitively proven, but fracking has been deemed to cause seismic activity elsewhere, including Britain.
The couples claim they have suffered physical damage to their homes, losses in the value of their real estate and emotional distress.
The distress was claimed to be "so severe ... no reasonable person could be expected to endure it".
The new legal claims come as BHP's controversial $US20 billion punt on shale gas is looking better value than at any time over the past 17 months. The benchmark US gas price hit $US3.99 per unit on Tuesday, and has not breached $US4 since September 2011.
Importantly, the price is now higher than it was when BHP bought the Fayetteville shale from Chesapeake on February 22, 2011.
That $US4.75 billion acquisition was written down by $US2.84 billion in August 2012 on the back of a slump in the gas price, so a rising gas price raises the prospect BHP could reverse that impairment.