Opinion ID: 2454108
Heading Depth: 5
Heading Rank: 2

Heading: The legislative tolerance for retroactivity

Text: Marathon points to the retroactivity that exists elsewhere in the statute and the fact that audits and royalty calculations occur well after the time of production. Royalty calculations involve amounts, such as tax reimbursement amounts, that cannot be known until some time after production. [26] Marathon argues that the 1986 amendments reflect a tolerance for retroactivity and that, therefore, the statute allows retroactive requests for contract pricing. But Marathon ignores a crucial distinction between the type of retroactivity it seeks and the retroactivity built into the statute's structure. The statute recognizes that royalties will be calculated retroactively, but that is different than allowing the method used to calculate royalties to be applied retroactively. Royalties are necessarily calculated after the fact because the amount of gas production and other inputs will not be known until after production has occurred. Selecting which royalty calculation method to apply, however, can be accomplished before production has occurred. [27]