Opinion ID: 401017
Heading Depth: 2
Heading Rank: 2

Heading: Wyoming Public Policy

Text: 12 We must look to the statutes and judicial decisions in Wyoming to determine that state's public policy with regard to the price escalation clause in this case. See Taylor v. State, 612 P.2d 851, 865 (Wyo.1980) (Rooney, J., concurring). 13 Although Congress specifically legislated in the NGPA regarding pricing of intrastate gas, it nevertheless provided that states may restrict the operation of indefinite price escalator clauses if they choose to do so. See 15 U.S.C. § 3432(a). 8 14 The conference agreement also cedes the Federal Government's authority to further limit the operation of indefinite price escalator clauses to State governments wishing to do so. The Congress, by adoption of this section, recognizes the right of States to prescribe more stringent limitations on the operation of such clauses than those prescribed herein. 15 H.R. Conf. Rep. No. 1752, 95th Cong. 2d Sess. 83, reprinted in 1978 U.S. Code Cong. & Ad. News 8983, 9000. 16 Some states have exercised their right to alter the public policy expressed in the NGPA by enacting greater restrictions on the use of indefinite price escalation clauses. See, e.g., Kan. Stat. Ann. 1980 Supp. § 55-1401 et seq.; Energy Reserves Group v. Kansas Power & Light Co., 630 P.2d 1142, 1150-53 (Kan.1981). We believe it is significant that the Wyoming legislature has not enacted any restrictions on the operation of clauses such as the one at issue in this case. 17 Moreover, in Amoco Production Co. v. Stauffer Chemical Co., 612 P.2d 463 (Wyo.1980), the Wyoming Supreme Court approved the enforcement of a favored nations clause contained in an intrastate gas contract. Contrary to the assertion of the trial court in this action, the briefs of the parties in Stauffer reflect that the issue whether favored nations clauses are against public policy was argued to the Wyoming court in that case. Despite the public policy argument, the Wyoming Supreme Court ordered the clause to be given effect, stating that 18 (f)avored nations clauses are a common feature of gas purchase and sale contracts. The nature of the product and its questionable availability engenders reluctance on the part of producers to enter into long term contracts at the price prevailing at the time of contract. Yet purchasers require long term commitments to insure an adequate supply of gas. A two-party favored nations clause provides an increase in price to match any higher price which the purchaser pays to any other seller. A third-party favored nations clause requires the purchase to match any higher price contracted to be paid by any other buyer in the same field or area.... Favored nations clauses are recognized by the courts. Superior Oil Company v. Western Slope Gas Company, 10th Cir. 1979, 604 F.2d 1281; Holly Sugar Corporation v. Fritzler, 42 Wyo. 446, 296 P. 206 (1931); Texas Gas Transmission Corporation v. Shell Oil Company, 363 U.S. 263, 80 S.Ct. 1122, 4 L.Ed.2d 1208 (1960). 19 ... The principal objective of (a third party favored nations clause) is to escalate the agreed price to equal the highest price being paid for the commodity by any other purchaser. 20 Stauffer, 612 P.2d at 468 (footnotes omitted) (emphasis in original). 21 The opinion in Stauffer and the failure of the Wyoming legislature to alter the policy expressed by the NGPA clearly indicate that indefinite price escalation provisions are not against the public policy of the state of Wyoming. Accordingly, the trial court's conclusion that the clause at issue here offends public policy is without legal foundation. 9