Opinion ID: 1829970
Heading Depth: 4
Heading Rank: 2

Heading: Fuel gas

Text: The fuel-gas portion of the unpaid volumes deals with the gas that is used in the development and operation of the leased area. The State argues that only gas flared for well-testing is to be royalty-free in accord with paragraph 5(a) and only gas used for lift purposes under paragraph 5(d) is subject to a deferred royalty until it is recycled and sold or used in such a manner as to entitle the State to a royalty. Exxon attempts to use the wording of paragraph 5(b) to support its claim that oil and gas leases customarily allow the lessee free use of fuel to develop and operate the lease. Paragraph 5(b) exempts gas used on or off the leased area ... solely in the development and operation of the leased area as provided herein. The State counters, arguing that as provided herein as used in paragraph 5(b) refers to flared gas and recycled gas mentioned in paragraph 5(d) and to no other gas. The lease language is clear on the matter of the fuel-gas claim. Exxon should have been aware that there was nothing customary about the leases it executed and that its reliance on custom would not prevail. Accordingly, although we conclude that the trial court erred in sending this issue to the jury because the evidence was legally sufficient for the trial court to resolve the issue as a matter of law, we nonetheless affirm the judgment for the State in the amount of $8,766,429, which represents 56.3% of the verdict for unpaid volumes.