D.C. DISTRICT COURT DENIES DEDUCTION OF COSTS FOR REMOVAL OF CO_2 FROM COALBED METHANE WHEN CALCULA TING ROYALTY

摘要

Amoco Production Company (Amoco), Atlantic Richfield Company, and Vastar Resources, Inc. (Vastar) filed complaints seeking declaratory judgment and appealing the decisions of the Assistant Secretary of the Department of the Interior (DOI) which disallowed certain costs related to removal of carbon dioxide (CO_2) in the calculation of royalties due on the sale of coalbed methane gas produced from federal leases. In Amoco Production Co. v. Baca, 300 F. Supp. 2d 1 (D.D.C. 2003), upon consideration of cross motions for summary judgment, the district court affirmed the decisions of the Assistant Secretary. Amoco and Vastar produced coalbed methane gas as lessees under federal oil and gas leases located in the San Juan Basin of northwestern New Mexico. The coalbed methane produced by these parties contained significantly higher levels of carbon dioxide than conventional natural gas. In calculating their royalty payments, Vastar and Amoco deducted certain costs related to the transportation and removal of CO_2. Vastar also applied for an extraordinary processing cost allowance for removal of CO_2.