Fifth Circuit Federal Court Weighs Contract Dispute About Overriding Royalties Owed While Payments to the U.S. as Landowner Are Suspended

摘要

An Opinion issued June 20 by the United States Court of Appeals for the Fifth Circuit reflected a narrow 2-1 decision that tackled a contractual interpretation dispute over whether overriding royalties are payable out of the initial oil and gas production from a tract of land on the Outer Continental Shelf (OCS) adjacent to Louisiana, when certain production itself didn’t qualify for royalty transfer to the U.S. as landowner under the Royalty Relief Act of 1995. Appeals from the United States District Court for the Eastern District of Louisiana were presented before Fifth Circuit Judges Garza, Dennis and Higginson. Circuit Judge Dennis delivered the Opinion. Judge Higginson issued a concurring view, agreeing with the Judge Dennis’ reasoning and outcome, but writing “to explain in further detail why I believe the contracts’ language is ambiguous.” Higginson resorted to a grammatical reconstruction of key phrases. Judge Garza dissented on grounds that there is no ambiguity. Total E&P USA, Inc., Statoil Gulf of Mexico, LLC v. Ker-McGee Oil and Gas Corp. (and individuals) No. 11-30038