JPMorgan Chase & Co. will begin a trial in San Antonio on claims it cheated Texas mineral-rights owners of $681 million, after the parties failed to complete a deal to end the case. Settlement talks continue.
Beneficiaries of the South Texas Syndicate Trust accuse the New York-based bank, which was supposedly working on their behalf, of instead hatching sweetheart deals with commercial- banking clients Petrohawk Energy Corp. and Hunt Oil Co. for cut- rate prices on the trust’s rights to drill in the Eagle Ford shale formation, the highest-yielding oil field in the U.S.
“We still have an agreement in principle,” Charles Gall, a JPMorgan lawyer, told the judge before jurors were brought into state court today. “But the devil is in the details.”
The trust beneficiaries claim they got only $32.5 million on rights that yielded benefits worth $1.1 billion because JPMorgan wanted to curry favor with its oil company clients at their expense. The bank rejected the claims as speculation and hindsight.
The trial, initially set for Nov. 7, was stalled that day as lawyers for both sides told Texas District Judge Larry Noll they had reached a tentative deal. Noll gave the parties until today to complete the accord or he’d bring in jurors to start a trial that could last five or six weeks.
The dispute centers on payments for rights to drill in the Eagle Ford, a shale formation that underlies much of central and southwest Texas that has helped put the U.S. in competition with Saudi Arabia and Russia for title of world’s largest oil producer.
Energy companies have spent the past five years scrambling to accumulate and drill as many acres as possible across that vast swath of Texas range.
The 132,000 contiguous acres owned by the trust lie southwest of San Antonio at the heart of the Eagle Ford. A discovery well drilled on the trust’s land in late 2008 put the oil play on the map by proving hydrocarbons could be commercially produced from the Eagle Ford through horizontal drilling and hydraulic fracturing, also known as fracking. Values of mineral rights across the region began to skyrocket as word of the discovery filtered out.
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