Amoco Production Co. v. Western Slope Gas Co., Civ. A. No. 80-W-1131.
| Decision Date | 06 April 1982 |
| Docket Number | Civ. A. No. 80-W-1131. |
| Parties | AMOCO PRODUCTION COMPANY, Plaintiff, v. WESTERN SLOPE GAS COMPANY, Defendant. |
| Court | U.S. District Court — District of Colorado |
Gorsuch, Kirgis, Campbell, Walker & Grover by Charles W. McDermott, Robert J. Kapelke and Lawrence P. Terrell, and R. H. Landt, Denver, Colo., for plaintiff.
Kelly, Stansfield & O'Connell by James R. McCotter, Denver, Colo., for defendant.
The court has diversity jurisdiction of this case in which Amoco seeks to recover some $6-million more than the money already paid by Western Slope for gas delivered from wells in La Plata County, Colorado, and, if it is successful in collecting this $6-million, Amoco wants another $4-million more than Western Slope says will be owed for gas delivered in the future from those wells. When the lawsuit started, there were several questions to be resolved, but the parties have agreed to a resolution of all disputes except the single argument as to whether Amoco is entitled to charge Western Slope "new gas" prices for "old gas" sold from the La Plata County wells. Amoco's claim for "new gas" prices stems from its reading of a letter agreement and the Natural Gas Policy Act, PL 95-621, 15 U.S.C. § 3301 et seq. Until a few days before trial there was a question in the case dealing with whether Amoco's efforts to enforce an indefinite price escalation clause were unenforceable because the clause was against public policy, but a negative answer was given to this question in Kerr-McGee Corporation v. Northern Utilities, Inc. v. Amoco Production Company (10 Cir. 1982) 673 F.2d 323. Amoco reads this decision to be a broad based license to charge the highest price available to anyone for all its gas, but I think that it settles only the single issue of public policy, and all other questions are open for decision in this court, astrict of Wyoming. In the Wyoming case the Tenth Circuit said the price charged could be the highest "price received by any producer selling interstate gas (and this provision) allowed the producers to receive the `small producers' rate for intrastate sales (even though the producer was not a small producer)." As I read the opinion, all it holds is that a contract permitting this isn't against public policy if that's what the contract means, but, at least in this case, and perhaps in the Wyoming case, what the parties intended by their contract is a question remaining for decision and that is what I shall decide.
The parties have been doing business with each other in the sale and purchase of gas produced in La Plata County for more than 20 years, and the original 1961 contract has been amended from time to time by letter agreements. There is no reason to go back of the October 31, 1973, letter agreement which provided in material part:
The 33¢ price aimed at giving Amoco the same price it would receive if the gas were to be sold in interstate commerce plus any increases for interstate gas which might be allowed by the Federal Power Commission. The parties intended a direct tie of the price of the intrastate gas sale to the price permitted for interstate gas sales, and to this date, all negotiations and agreements between the parties were founded on this mutual intent. With the Middleast oil crisis, the industry was well aware that Congress was likely to make direct entry into the picture, and, accordingly when the agreement came up for renegotiation, both Amoco and Western Slope wanted to insert language intended to include anticipated legislation and both anticipated Congressional action concerning "new oil" and "old oil." Accordingly, a letter agreement of July 21, 1978, was entered into, and, with the material changes from the 1973 agreement italicized, it said:
Congress acted three months after the 1978 agreement was signed and two months before it took effect. Insofar as resolution of this case is concerned, the most important provisions of the Natural Gas Policy Act are its sections 102 15 U.S.C. § 3312 and § 105 15 U.S.C. § 3315. The pertinent parts of those two sections of the Act read:
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