Justia Government Contracts Opinion SummariesArticles Posted in Energy, Oil and Gas
ConocoPhillips Co. v. Lyons
This case stemmed from a dispute over the proper calculation of royalty payments on state oil and gas leases. Over the years, the Legislature has enacted several versions of the statutory oil and gas lease, and Lessees have entered into “hundreds” of oil and gas leases with the State. Specifically, the New Mexico Legislature enacted statutory oil and gas leases in 1919, 1925, 1927, 1929, 1931, 1945, 1947 and 1984. This appeal concerned the royalty clauses contained in the 1931 and the 1947 statutory lease forms. Both the 1931 lease and 1947 lease specified that the payment of royalty was to be calculated as a percentage of the “net proceeds” resulting from the sale of gas. During 2005 and 2006 Commissioner audited ConocoPhillips Company and Burlington Resources Oil & Gas Company’s royalty payments. Following the Audit, Commissioner notified Lessees that they had been underpaying their royalty obligations and issued them assessments for the underpayment. The Commissioner claimed that pursuant to the terms of the statutory lease forms Lessees could not deduct the post-production costs necessary to prepare the gas for the commercial market when calculating their royalty payments. Commissioner claimed that the improper deductions for post-production costs resulted in ConocoPhillips underpaying royalties by approximately $18.9 million and Burlington underpaying by approximately $5.6 million. In response to Commissioner’s audit and assessments, Lessees filed a complaint in the district court seeking a declaration that Commissioner’s assessment of additional royalty constituted a deprivation of due process, an unconstitutional impairment of contract, and breach of contract. In addition, Lessees claimed that Commissioner had exceeded his constitutional and statutory powers by issuing the assessments and had effectively usurped legislative power by seeking royalty payments under calculation methods not approved by the Legislature. In response, Commissioner alleged a host of counterclaims for breach of contract, breach of the implied covenant of good faith and fair dealing, and breach of the implied covenant to market. This appeal pertained to three orders granting summary judgment on behalf of Lessees and a fourth order denying Commissioner’s motion for reconsideration of the district court’s previous dismissal of his counterclaim for breach of the implied covenant to market. In the first order, the district court granted Lessees’ motion for summary judgment. Upon review of the several orders and claims before the Supreme Court on appeal, the Court affirmed the trial court's grant of summary judgment.View "ConocoPhillips Co. v. Lyons" on Justia Law
NE Energy Partners, LLC v. Mahar Reg’l Sch. Dist.
The Regional School District (Mahar), entered into a price watch agreement with Northeast Energy Partners, a licensed broker of energy services based in Connecticut, pursuant to which Northeast would negotiate and secure contracts for the provision of Mahar's electricity from energy suppliers. Mahar did not enter into the agreement to obtain Northeast's services pursuant to the competitive bidding procedures contained in G.L. c. 30B. When Mahar questioned the validity of the agreement, Northeast sought a declaratory judgment that the agreement is valid and enforceable because, under G.L. c. 30B, 1 (b ) (33), the agreement is exempt from the competitive solicitation and bidding procedures set forth in G.L. c. 30B. The Massachusetts Supreme Court ruled in favor of Northeast, holding that a contract between a school district and an energy broker for procurement of contracts for electricity is exempt from the requirements of G.L. [c.] 30B as a contract for 'energy or energy related services' pursuant to G.L. c. 30B, 1 (b ) (33). View "NE Energy Partners, LLC v. Mahar Reg'l Sch. Dist." on Justia Law