Opinion ID: 151845
Heading Depth: 2
Heading Rank: 3

Heading: The Joint Operating Agreement

Text: The JOA, in its Article III.B, set out a general scheme of liability apportionment: Unless changed by other provisions, all costs and liabilities incurred in operations under this agreement shall be borne and paid, and all equipment and materials acquired in operations on the Contract Area shall be owned, by the parties as their interests are set forth in [the WIUA]. In the same manner, the parties shall also own all production of oil and gas from the Contract Area subject to the payment of royalties to the extent of their interests which shall be borne as hereinafter set forth. Regardless of which party has contributed the lease(s) and/or oil and gas interest(s) hereto on which royalty is due and payable, each party entitled to receive a share of production of oil and gas from the Contract Area shall bear and shall pay or deliver, or cause to be paid or delivered, to the extent of its interest in such production, the royalty amount stipulated hereinabove and shall hold the other parties free from any liability therefor. No party shall ever be responsible, however, on a price basis higher than the price received by such party, to any other party's lessor or royalty owner, and if any such other party's lessor or royalty owner should demand and receive settlement on a higher price basis, the party contributing the affected lease shall bear the additional royalty burden attributable to such higher price. After thus setting out the relationship between the parties generally, the JOA then specifically addressed the situation where a signatory did not want to take part in a proposed well drilling operation. If a party did not consent to the drilling of a proposed well, the JOA gives Consenting Parties the right to drill anyway and lays out the rights and obligations of the consenting parties. Article I of the JOA also defined the terms consenting party and non-consenting party: The terms `Drilling Party' and `Consenting Party' shall mean a party who agrees to join in and pay its share of the cost of any operation conducted under the provisions of this agreement.... The terms `Non-Drilling Party' and `Non-Consenting Party' shall mean a party who elects not to participate in a proposed operation. The JOA states in its Article VI.B2, [t]he entire cost and risk of conducting such operations shall be borne by the Consenting Parties in the proportions they have elected to bear.... Finally, in a subsequent portion of its Article VI the JOA contains the statement that: During the period of time Consenting Parties are entitled to receive Non-Consenting Party's share of production, or the proceeds therefrom, Consenting Parties shall be responsible for the payment of all production, severance, excise, gathering and other taxes, and all royalty, overriding royalty and other burdens applicable to Non-Consenting Party's share of production.... This JOA provision, which for convenience of identification we call the Royalty Provision, is the language principally at issue here. Barnes argues that Tawes, as a Consenting Party, is responsible for all royalty owed to her.