Royalty and Royalty Interests: Market Value Court Jurisdiction, Procedure and Review: Class Action

摘要

A certified class of royalty and overriding royalty owners (the class) sue BP America Production Company (BP) claiming that BP breached two types of royalty clauses—a market-value lease and a same-as-fed lease. The class complains of two issues regarding BP's use of the netback method for market-value-at-the-well contracts. They argue that BP is selling refined NGLs at the plant tailgate to an affiliate at a discount, thereby lowering the sales price and the royalties paid to the class. Second, the class complains that BP's co-ownership of the processing plant results in BP's deduction of inflated processing costs, further reducing the royalties paid. BP and the class both move for summary judgment. In its motion, BP argues compliance with the royalty provisions because "its royalty payments fell within a range of market values." The class argues that BP breached the contracts through its use of the netback method, which was both inappropriate and flawed. Both motions fail and a jury considers evidence regarding royalty calculations by the other co-owner, ConocoPhillips (COP), which uses the same-as-fed royalty calculation method.