Court Opinion

ID: 9758618
Source: CourtListenerOpinion
Date Created: 2023-08-28 23:38:13.979557+00
Date Added: 2024-06-11T07:28:53.454438
License: Public Domain

LÓPEZ, Justice,
dissenting.
I disagree that the parties to the oil and gas contract intended that royalties would be paid only on the volume of gas measured prior to delivery at a point downstream from the tailgate of the plant. The contract states that royalties would be paid on all gas produced and used off the leased premises. Use of gas for plant fuel and compressor fuel is a use off the leased premises. See Piney Woods Country Life Sch. v. Shell Oil Co., 726 F.2d 225, 241 (5th Cir.1984).
The majority opinion interprets the contract’s “value” definition as an indication that royalties are not required to be paid on the plant fuel and compressor fuel because the MMBtus of the volume of gas retained at the tailgate of the plant is not measured. However, the contract’s definition of “value” does not alter the volume of gas for which the contract requires royalties to be paid, and royalties are readily calculable for the retained gas under the contract’s stated value formula. Both the volume and the Btu content of the retained gas is measured. Because the gas does *259not undergo any further processing, the MMBtu content of the gas would not change between the tailgate of the plant, where the gas is retained and which is defined as the field delivery point in the contract, and the point downstream from the tailgate of the plant where the remaining gas is delivered. In fact, the charts provided in the stipulation of fact convert the measured Btu content of the retained gas to MMBtus.
The parties’ intention that royalties should be paid on plant fuel and compressor fuel under the royalty provision at issue is further clarified when the royalty provision at issue is read in conjunction with the other royalty provisions contained in the contract. The other royalty clauses expressly state that the Lessees could use lease gas, royalty-free, for fuel in readying the gas and its products for market. If the parties had intended that lease gas could similarly be used royalty-free under the royalty provision at issue, the parties would have made the same express provision. I therefore dissent.