Federal - Oil & Gas

摘要

In W&T Offshore, Inc. v. Bernhardt, 946 F.3d 227 (5th Cir. 2019), the U.S. Court of Appeals for the Fifth Circuit invalidated the Office of Natural Resources Revenue's (ONRR) process to resolve its royalty-in-kind program. More than a decade ago, ONRR initiated a pilot program to accept royalty on production from offshore oil and gas leases in kind, rather than in value. When lessees delivered volumes of gas as in-kind royalty, they did not deliver the precise volumes owed on a monthly basis; they delivered excess gas in some months and less gas in other months, resulting in imbalances. During the royalty-in-kind program, ONRR issued a series of letters to lessees (known as "Dear Operator" letters) explaining how imbalances would be resolved. See id. at 231.