Court Opinion

ID: 9652840
Source: CourtListenerOpinion
Date Created: 2023-08-23 17:33:19.252053+00
Date Added: 2024-06-11T18:12:54.525806
License: Public Domain

On Petition for Rehearing.
We call attention to a material difference in the utilization of gas in the Rich-land Field of Louisiana, as discussed in the Sartor cases, and the utilization of plaintiffs’ gas. It is a matter of common knowledge that in the Richland Field such gas was readily marketable to pipe line companies. In the Panhandle Field of Texas only a portion of the gas produced is taken by pipe lines, and it is conceded by both parties that there is no market for plaintiffs’ gas to the pipe line companies. Therefore, the prices paid by pipe line companies in the Panhandle Field can have no bearing in fixing either the market price or the actual value of plaintiffs’ gas, and to that extent the Louisiana cases are not applicable here.
In substance, this Court holds:
(1) The burden of proof is on the plaintiffs.
(2) The contract between the parties cannot be ignored by the Court unless it were illegal or impossible of performance.
(3) Market price of gas is determined by sales of gas, comparable in time, quantity, quality, and availability to marketing outlets.
(4) The proof by plaintiffs of no comparable sales in Moore County is not proof that there were no comparable sales by which market price could be shown.
(5) County boundaries are not a factor in making proof of the existence or nonexistence of market price in the Panhandle Field.
(6) Since plaintiffs’ gas cannot be sold to pipe lines, and since numerous factors enter into the price or value of pipe line gas that generally do not enter into the price or value of non-pipe line gas in the Panhandle Field, it was error to admit evidence of the prices paid by pipe line companies on the question either of market price or actual value.
(7) The absence of daily sales of gas on a fluctuating or competitive market cannot annul the provisions of the contract requiring payment for royalty gas at the market price at the well, if there was, in actuality, a market price created by sales that are comparable in time, quantity, quality, and availability to marketing outlets.
(8) The term “market price at the well” cannot mean market price at the Bynum Well, but it means the price which similar gas brings at the mouth of wells generally in the field. To hold otherwise would render the term meaningless, for obviously none but the lessee has taken, or can take under the present contract, gas from the mouth of that well, and it was never the intention of the parties to allow the lessee to fix the price by the price that it fixed. It could not set its own price as the standard of right, for it was intended that it should be required to pay as much as other similar purchasers were paying in comparable purchases of similar gas.
(9) Actual value or intrinsic value may not be shown unless it first be shown that there was no market price established by comparable sales.
The petition for rehearing is denied.
McCORD, Circuit Judge, dissents.