BHP's shale gas division faces claims

BHP Billiton's controversial shale division is 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.

BHP Billiton's controversial shale division is 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 sued 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 group.

The more financially significant claim - which seeks more than $US5 million ($4.8 million) in damages - is a class action that alleges landowners have been underpaid royalties owed to them for hosting shale wells on their property.

According to the claim, 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 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 last July, when plaintiffs Denny and Diane Brown claimed that 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 group 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 worth of 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 a magnitude of 4.7 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 in other countries, including Britain.

The two couples claim they have suffered physical damage to their homes, losses in the value of their real estate and emotional distress as a result of the fracking.

The distress was claimed to be "so severe in nature, no reasonable person could be expected to endure it".

The new claims come as BHP's controversial $US20 billion punt on shale gas is looking better value than it has at any time over the past 17 months. The benchmark US gas price reached $US3.99 per unit on Tuesday. The price is now higher than it was when BHP bought the Fayetteville shale field from Chesapeake on February 22, 2011.

That $US4.75 billion acquisition was written down by $US2.84 billion in August 2012 after a slump in the gas price, so a rising gas price raises the prospect that BHP could reverse that impairment.

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