Amoco Production Co. v. Delhi Gas Pipeline Corp., 05-83-00655-CV
| Decision Date | 28 June 1984 |
| Docket Number | No. 05-83-00655-CV,05-83-00655-CV |
| Citation | 674 S.W.2d 469 |
| Parties | AMOCO PRODUCTION COMPANY, Appellant, v. DELHI GAS PIPELINE CORPORATION and Oklahoma Natural Gas Company, Appellees. |
| Court | Texas Court of Appeals |
S. Tom Morris, Gibson, Ochsner & Adkins, Amarillo, for appellant.
W.S. Barron, Jr., Brice & Barron, Leo J. Hoffman, Strasburger & Price, Dallas, for appellees.
Before CARVER, SPARLING and ROWE, JJ.
Amoco Production Company appeals the trial court's denial of its claim against Delhi Gas Pipeline Corporation based upon a price escalation provision in their gas purchase agreement relating to sixteen gas wells of Amoco in Oklahoma whose production is sold, intrastate, to Delhi under the agreement. We affirm.
The court desires at the outset to gratefully remark upon the high level of professional presentation we have enjoyed in this cause, both in the record made in the trial court and in the briefs and oral arguments presented here.
The facts are not in dispute. Officers of experience and authority for both Amoco and Delhi negotiated and concluded a gas purchase agreement on the earliest completed of the sixteen wells and, as subsequent wells were completed, executed identical additional contracts. Common to each of the contracts was an escalation clause providing:
If the Federal Power Commission or any successor governmental authority having jurisdiction in the premises shall at any time hereafter prescribe by order following hearing, or by settlement, a just and reasonable area ceiling rate for gas-well gas, purchased under contracts entered into on or before the date hereof, which is higher than the rate herein provided to be paid, then the rate to be paid by Buyer to Seller for gas-well gas purchased and sold under the provisions of this Agreement shall be increased to equal such higher rate including any adjustments for quality of the gas, such increase to be effective on the date set forth in the Federal Power Commission order finally approving said increased area ceiling rate; provided, however, that if said order so increasing the area ceiling rate is subject to administrative review or to judicial review by a court of competent jurisdiction, Buyer shall not pay said increased area ceiling rate until it has been furnished a bond or other satisfactory indemnification by Seller assuring refund with interest to Buyer should the administrative review or the judicial review result in a reduction in or return to the previous area ceiling rate, in which event the price payable hereunder shall be the price set forth in Section 5.1 above or the increased area ceiling rate so determined, whichever is higher.
During the period when the first seven of the gas purchase contracts were made, the Federal Power Commission orders fixing area ceiling prices for natural gas sold in interstate commerce categorized prices according to the date, or age, of gas purchase contracts, or "contract vintaging," as well as the chemical characteristics of the gas itself. During the period when the last four of the gas purchase contracts were made, the Federal Power Commission issued opinions No. 699H and No. 770A which fixed national (as distinguished from area ) ceiling prices for natural gas sold in interstate commerce and categorized prices according to the date and age of the gas well (as distinguished from the date, or age, of the gas purchase contract ). Both orders continued unchanged the factor of the chemical composition of the gas. It is seen then that opinions No. 699H and No. 770A substituted: (1) national ceilings rather than area ceilings; and (2) well vintaging rather than contract vintaging. On December 1, 1978, after all contracts had been executed, the Natural Gas Policy Act of 1978, 15 U.S.C.A. Sec. 3301 et seq., became effective and superseded prior orders of the Federal Power Commission. The Act categorized prices on the date, or age, of completion of each gas well, or "well vintaging," as well as the chemical characteristics of the gas itself. All of the gas purchased by Delhi from Amoco is, and has been, resold to Oklahoma Natural Gas Co. for retail distribution. Oklahoma intervened in this suit, adopted the position of Delhi, but neither sought nor was granted any relief by judgment.
At trial before the court, Amoco contended (1) that the escalation clause was unambiguous; (2) that Federal Power Commission opinions No. 699H and No. 770A each triggered the contract escalation clauses; (3) that subsequently Congress and the President, in passing into law the National Gas Policy Act (NGPA), was a "successor governmental authority" to the Federal Power Commission; which after "hearing" had "prescribed by order" (the statute) a just and reasonable national ceiling rate for gas well gas "purchased under contracts entered into on or before the date hereof" [each of the eleven contracts between Amoco and Delhi]; "which is higher than the rate herein provided"; consequently, NGPA also triggered the escalation clauses; therefore, Amoco was entitled to the benefits of the escalation clause under all three theories. The arithmetic amounts of escalation were not in dispute, nor was the interest due for late payment, nor was the reasonable attorney's fee, in the event Amoco was shown to be correct.
Delhi contended (1) that the escalation clause was unambiguous; (2) that the escalation clause, evidenced by its terms and the extrinsic admissible evidence, showed a common intention of the parties to place, and keep, the price of gas from each of Amoco's sixteen wells in parity with the price Amoco would, under current and successive orders of the Federal Power Commission or even a congressional act, have realized had gas from that well been sold in interstate commerce; and (3) each of Amoco's sixteen wells fails to qualify for escalation because the same well, if its gas were presently being sold in interstate commerce, would fail to qualify for the ceiling price fixed by the successive opinions of the Federal Power Commission or by the Natural Gas Policy Act.
The trial court's amended findings include:
9. Throughout the period during which FPC Opinion No. 699-H was in effect, Delhi paid to Amoco the 699-H ceiling price for all gas sold from each well which would have qualified for that price if sold in interstate commerce.
10. Throughout the period during which the FPC Opinion No. 770-A was in effect, Delhi paid to Amoco the applicable 770-A ceiling price for all gas sold from each well which would have qualified for that price if sold in interstate commerce.
11. For all gas sold by Amoco to Delhi since the effective date of the NGPA, Delhi has paid Amoco the applicable Section 104 price, including monthly price increases in accordance with the annual inflation adjustment factor, for which such gas would have qualified if sold in interstate commerce.
12. A dispute exists between Amoco and Delhi as to whether vintaging is to be taken into account in applying the FPC national ceiling prices and the NGPA prices to sale under the Gas Purchase Agreements; Delhi contends that vintaging is to be taken into account and made the payments described in Findings of Fact Nos. 9, 20 and 11 on that basis.
13. In including the price escalation clause in the Gas Purchase Agreements, it was the intention of the parties to incorporate a vintaging concept with future price increases based on a multi-tiered pricing structure and not on a single price basis.
14. The price escalation clause in the Gas Purchase Agreements was composed and prepared by authorized personnel of Amoco.
The trial court's conclusions of law include:
1. The price escalation clause of the Gas Purchase Agreement is not ambiguous.
2. The intention of Amoco and Delhi, as reflected in the unambiguous language of the price escalation clause, is that in implementing such clause with reference to the FPC Opinions Nos. 699-H and 770-A, and with reference to the pricing provisions of the NGPA, the vintage of the gas sold by Amoco to Delhi is to be taken into account so that Amoco would receive a price as high as the price that Amoco could have received for the same gas if it had sold the gas in interstate commerce...
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Placid Oil Co. v. Louisiana Gas Intrastate, Inc.
...or the date on which the well producing the gas was completed (well vintaging). See Amoco Prod. Co. v. Delhi Gas Pipeline Corp., 674 S.W.2d 469, 470 (Tex.App.--Dallas 1984, writ ref'd n.r.e.). With respect to intrastate gas and the NGPA regulatory scheme, the concept of "vintaging" is encom......