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Trinity East Energy Sues City of Dallas Over Oil and Gas Leases

Trinity East paid $19 million with assurances before Dallas City Council blocked plans

DALLAS, Feb. 13, 2014 /PRNewswire/ -- A Fort Worth-based oil and gas exploration company filed a lawsuit against the City of Dallas on Thursday after the company paid more than $19 million to secure oil and gas leases on city property and invested far more in the project, only to have drilling permits on three separate tracts denied by the Dallas City Council.

The lawsuit claims breach of contract, fraud and unconstitutional taking/inverse condemnation stemming from written and oral assurances made by former Dallas City Manager Mary Suhm and other Dallas officials in support of Trinity East Energy's plan to drill for natural gas in the Barnett Shale geological formation deep under 3,600 acres of uninhabited and undeveloped portions of west Dallas.

According to the lawsuit, Trinity East ultimately invested more than $30 million in an attempt to extract natural gas conveyed to the company through its lease purchases. The company's total losses over the lifetime of the wells exceed several hundred million dollars.

"This is about a deal, plain and simple. We had a deal with the City of Dallas and they went back on it," says Stephen Fort, President of Trinity East Energy. "The city made promises to us and took our money. They sold us minerals but then denied us the ability to extract them."

Facing a $90 million budget shortfall in 2007, city leaders raised much-needed revenue by asking energy companies, including Trinity East, to submit proposals to lease city property and drill for oil and gas. Trinity East worked closely with city officials to design the necessary system of equipment on remote, uninhabited city property, much of which is in a flood plain and cannot be developed. Currently there are more than 2,000 wells located in the flood plain in and around Dallas County.

Besides the $19 million signing bonus, terms of the lease included a 25 percent ongoing royalty on the natural gas produced, which potentially would have paid out hundreds of millions of dollars for Dallas taxpayers over the life of the wells. In addition, the ad valorem tax base created on producing minerals would have paid the city, county and school district a large stream of income over the same period of time.

While the Trinity East lease clearly notes the company's right to drill on selected city-owned tracts, the lawsuit also states that Trinity East proceeded with the lease purchase based on assurances from city staff – including a letter signed by Ms. Suhm. The letter also underscores that Trinity East was relying on those representations in closing the transaction. However, after the leases were finalized and paid for, and after five more years of work by Trinity East, the Dallas City Council voted in August 2013 to deny all three of Trinity East's permits to extract the natural gas that the company is entitled to under the lease terms.

For more information on today's filing, please contact Mark Annick at 800-559-4534 or [email protected].

SOURCE Trinity East Energy

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