Opinion ID: 543116
Heading Depth: 3
Heading Rank: 5

Heading: Additional Challenges.

Text: 87 In their reply brief, the royalty owners raise several entirely new arguments that are not in response to any arguments in Shell's brief. Because [a]n [appellant's] original brief abandons all points not mentioned therein, Nissho-Iwai Co. v. Occidental Crude Sales, Inc., 729 F.2d 1530, 1539 n. 14 (5th Cir.1984), 18 we may decline to consider these new claims. We therefore make only a few remarks as to each of the points discussed below. 88 First, the royalty owners claim that from 1978 onward, Shell had the ability to sell gas in the interstate market and thus could have circumvented the limitations of section 105. The royalty owners consequently maintain that the market price should not be constrained by section 105, as Shell was not bound by it. Shell's opportunity to sell excess gas to Transco in the interstate market, though, materialized in 1982 only because Shell was able to renegotiate its contracts with MP&L and MCC and thus free some gas for the interstate market. The royalty owners have not shown that Shell could have altered its contracts with gas purchasers at will. 89 Although we do not assume in general that contractual obligations entirely circumscribe the relevant market, see J.M. Huber Corp. v. Denman, 367 F.2d 104, 108-10 (5th Cir.1966), we do not assert, where regulation limits most of the intrastate market on the basis of existing contract prices, that the market value of an intrastate seller's gas presumes that the seller is able successfully to renegotiate the sales contract to release gas to the interstate market. In fact, if, as the royalty owners maintain, higher prices were indeed available in the post-1978 interstate market, then had Shell been able to release gas to that market earlier, it almost surely would have done so, since the increased sales revenues would have more than compensated for the increased royalties. Because Shell's interests were not adverse to those of the royalty owners, there is no apparent opportunity for manipulation by Shell comparable to that which we found in Shell's power to choose where title to the gas was to be passed. See Piney Woods II, 726 F.2d at 232. 90 Second, and similarly, the royalty owners contend that, as the re-drilling of the Garrett well enabled it to be classified under section 107 even though it was originally spudded before February 19, 1977, the possibility that Shell could have re-drilled the other pre-1977 wells should cause the market value of gas from all of these wells to be released from any section 105 limitations. While the possibility of a conflict of interest between the royalty owners and Shell might exist here, we still do not find a duty on Shell's part to re-drill wells in order to alter the regulations governing those wells. In Piney Woods II, id. at 239 n. 17, we quoted from Middleton, 613 S.W.2d at 246-47, which stated that comparable sales are those made in the same category of a regulated market. Under this method of assessing market value, Shell as lessee must pay royalties on the market price of gas under the existing regulatory scheme governing each well but is not necessarily required to act to change the regulatory scheme to achieve higher prices. 91 Essentially, the royalty owners' first two arguments suggest that Shell must act to alter the regulatory classification of particular wells, by redrilling or by restructuring the contract. The royalty owners provide no basis for imposing such an extensive burden on Shell. 92 Third, the royalty owners assert that the wells not classified under section 107 nonetheless qualify for the higher deregulated prices because of an area rate clause in the Shell-MP&L contract that provides for prices to increase, upon a raising of price ceilings, to the level of the new ceiling. However, this does not mean that the price shall be raised to the highest rate permitted for any well under federal law; rather, the price of gas sold from a particular well rises only to the highest rate for which that particular well lawfully qualifies. In this case, the wells not classified under section 107 are limited to the prices available under section 105. 93