Opinion ID: 1862385
Heading Depth: 2
Heading Rank: 3

Heading: Conflicting Jurisprudence

Text: We are aware of the federal and state court jurisprudence holding contrary to the position we assert herein. See, e.g., Gerard J. W. Bos & Co., Inc. v. Harkins & Co., 883 F.2d 379 (5th Cir.1989) (payments under a settlement for cancellation of a take or pay gas contract are not subject to royalty); Diamond Shamrock, supra (no royalty due on take-or-pay payments received in ordinary course of business); Piney Woods Country Life School v. Shell Oil Co., 726 F.2d 225, 234 (5th Cir.1984), cert. denied, 471 U.S. 1005, 105 S.Ct. 1868, 85 L.Ed.2d 161 (1985) (a gas sale contract is executory and ... no particular gas is sold until it is identifiedโi.e., brought to the surface.); Killam Oil Co. v. Bruni, 806 S.W.2d 264, 267 (Tex.App.-San Antonio 1991), writ denied (no royalty is due on settlement proceeds resulting from breach of take-or-pay provision in gas purchase contract); Wyoming v. Pennzoil Co., 752 P.2d 975, 980 (Wyo.1988) (royalties are due only upon physical extraction of the gas from the leased tract). See also ANR Pipeline Co. v. Wagner & Brown, 44 FERC ถ 61,057 (1988) (take-or-pay payments do not violate maximum lawful price (MLP) provisions of the NGPA); Kramer, 39 Oil & Gas L. & Tax'n at ง 5.01 n. 1 (commentators split evenly over whether royalty obligations are owed upon receipt of take-or-pay monies). We need hardly state that such law is only persuasive in our jurisdiction. Nor does this mark the first time we decline to follow a majority view. See, e.g., Henry, supra . Most important, the mineral law of Louisiana evolved not from the common law, but from the Civil Code, richly steeped in our civilian heritage. See La.R.S. 31:2, comment. Finally, in responding to the question certified, we have deliberately refrained from distinguishing recoupable payment from nonrecoupable payment. We note in passing, however, Columbia has recouped in cash the entire $45.6 million recoupable take-or-pay settlement payment made to Amoco. Clearly, Frey is entitled to a royalty payment for the gas actually taken, and has, in fact, received such a payment. However, it may be in cases such as this the lessor is also entitled to compensation for the lost time value of money. We leave to the federal courts the intricacies of the accounting, unpersuaded the complexity of the task should in some manner influence our decision. See Brasher v. Alexandria, 215 La. 887, 41 So.2d 819 (1949) (encounter of unforeseen difficulties does not excuse party's performance under the contract). In this case, the settlement agreement establishes the price per unit of gas recouped during the make-up period, and thus we pretermit discussion of the issues raised should the original contract price be higher or lower than the price of the gas at the time of recoupment. See Diamond Shamrock, supra . We do note, however, courts are free to provide for such contingencies in their judgments and thus to protect the producer and royalty owner from overpayment or underpayment of royalty, respectively.