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

Heading: Other Omissions in the Study.

Text: 47 We note that there are other oversights and inconsistencies in the Bennett study, as pointed out by Shell. These include ignoring transportation costs that, for certain buyers in the study, would make the purchase of Thomasville gas more expensive than it would otherwise appear; failing to compensate for various forms of consideration apparent in the gas purchase contract but not embodied in the price term alone; and not including a few sales, where those sales as a group had prices significantly lower than Bennett's reported market values. 48 c. Potential Purchasers. 49 The royalty owners did present some evidence showing that certain purchasers were interested in buying large quantities of gas. However, one of these potential purchasers, Mississippi Valley Gas (MVG), bought gas primarily from interstate pipelines. Shell presented evidence suggesting that because the supply of interstate gas fluctuated considerably, MVG needed considerable flexibility in supplementing its interstate supply, and thus, MVG could not enter into a consistent-take contract with respect to any purchase from the Thomasville facility. 8 50 Moreover, significant transportation distances would be involved in MVG's use of the gas to supplement interstate supplies. This increased cost of course would make the gas less valuable to MVG. We do not find error in the district court's rejection of MVG as a potential purchaser at the prices and conditions suggested by the royalty owners. 51 The royalty owners also presented evidence that Mississippi Power Company would have been willing to buy 30,000 mcf per day at $2.00 per mcf during the 1970's. Shell's experts testified to the contrary, asserting that the only potential large-scale buyers of gas from the Thomasville facility were those with whom Shell already had a contract, namely MCC and MP&L. Moreover, the royalty owners' expert, Mr. Tierney, was largely unaware of the conditions peculiar to the Thomasville plant and also was unable to deny Shell's charge that Mississippi Power Company had substantially fluctuating needs in terms of gas takes, thus making the Thomasville gas less suitable. We discern no clear error here. 52 Apparently, the only other fairly large purchaser for which the royalty owners produce a corresponding offering price was St. Regis Paper Company (St. Regis), which, they maintain, was ready to buy 12,000 to 14,000 mcf per day at $1.80 to $2.00 per mcf. St. Regis, though, also had variable-take needs. Tierney seemed to imply that the pipeline company that was selling gas to St. Regis during the relevant time could have adjusted its deliveries as appropriate to St. Regis's needs, but given Tierney's unfamiliarity with Thomasville's conditions and Shell's experts' testimony, the district court could have found that St. Regis could not enter into a contract for uniform daily distributions, as the Shell-MisCoa contract provided. 9 53 d. Actual Thomasville Production. 54 The royalty owners also presented rebuttal evidence showing that the actual monthly production of gas at Thomasville, until March 1978, was, with the exception of seven of the months, far below what would be necessary for a daily average of 40,000 mcf. By presenting this data, the royalty owners attempt to undermine Shell's arguments concerning the uniqueness of Thomasville's high-volume, consistent-take requirements. However, as comparable contracts are necessarily fairly long-term, the potential buyer of the Thomasville plant gas would still have to be prepared to take the large volumes at any time, even if those volumes actually were not taken frequently. 55 Furthermore, the royalty owners do not present any evidence to show that there were not certain days in the months in question on which volumes were as high as 40,000 mcf. Thus the royalty owners' evidence really does not show that potential buyers of gas from the Thomasville plant would face less difficulty or risk merely because Thomasville did not always deliver its full allotment under the contract. 10 56 e. Price Redetermination Clauses. 57 We are not oblivious to the fact that during the 1972-1978 period, gas prices usually rose sharply where contracts permitted prices to be redetermined and that even if the sales under such contracts were for gas not comparable to that sold from the Thomasville plant (and hence such sales could not establish any particular market value for the Thomasville gas), price increases in other contracts might at least suggest that the market value at Thomasville did increase during the years 1972-1978. 58 However, the existence of such an increase in value is still sufficiently speculative that we cannot say that the district court erred in finding that market value was more likely reflected in actual sales prices. It cannot be enough for the plaintiffs merely to show by a preponderance of the evidence that actual sales prices are not a correct representation of market value. Possible market values form a continuum, and the level of uncertainty inherent in the assessment of market value of a unique gas field over a period of fifteen years, fraught with fluctuating market conditions and varying governing legal regimes, is such that any given market value could be shown to be inexact by a preponderance of the evidence. 59 Even if the residuum of credible evidence left after Shell's rebuttal of the royalty owners' proof showed by a preponderance of the evidence (based upon price increases under contracts that had allowances for price redetermination) that market value exceeded Shell's contract price, the court has no basis on which to award damages without some proof of the relationship between prices at Thomasville and those elsewhere. Therefore, even if actual sales prices under the Shell-MisCoa contract were less than market value, the district court would not necessarily be required to award damages where it also could find that the royalty owners' evidence, given appropriate weightings, fails to establish by a preponderance of the evidence any lower limit for market value (other than that of the actual sales under the Shell-MisCoa contract). 60 f. Conclusion--1972-1978. 61 Therefore, for the period through December 1978, we are not left with the definite and firm conviction that a mistake has been committed. United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 542, 92 L.Ed. 746 (1948). We discern no clear error and affirm the district court's finding that the actual sales prices received under the Shell-MisCoa contract were the best indicator of market value. 11 62