Atlantic Richfield Co v. Farm Cred Bnk Wichita, SALAZAR-TIER
Court | United States Courts of Appeals. United States Court of Appeals (10th Circuit) |
Writing for the Court | BRISCOE |
Citation | 226 F.3d 1138 |
Parties | (10th Cir. 2000) ATLANTIC RICHFIELD COMPANY, Plaintiff-Counter-Defendant-Appellee, v. THE FARM CREDIT BANK OF WICHITA, formerly known as the Federal Land Bank of Wichita, Defendant-Counter-Claimant-Appellant, and STANLEY A. MOLLERSTUEN; HAL A. McVEY; HELEN D. McVEY; CAROL KOSCOVE, Defendants-Counter-Claimants, ALFRED GARCIA; NADDIE GARCIA; EDWARD GARCIA; MARY RUTH; PEGGY GARCIA; JACQUIE GARCIA; CATHERINE VOELKERDING; MANUELITA BECK; ANNA M. MARTINEZ; GERALDINE VELASQUEZ, Intervenors, and NATIONAL ASSOCIATION OF ROYALTY OWNERS, INC., Amicus Curiae. ATLANTIC RICHFIELD COMPANY, Plaintiff-Counter-Defendant-Appellant, v. THE FARM CREDIT BANK OF WICHITA, formerly known as the Federal Land Bank of Wichita; CAROL KOSCOVE, Defendants-Counter-Claimants-Appellees, and STANLEY A. MOLLERSTUEN; HAL A. McVEY; HELEN D. McVEY, Defendants-Counter-Claimants, ALFRED GARCIA; NADDIE GARCIA; EDWARD GARCIA; MARY RUTH; PEGGY GARCIA; JACQUIE GARCIA; CATHERINE VOELKERDING; MANUELITA BECK; ANNA M. MARTINEZ; GERALDINE VELASQUEZ, Intervenors-Appellees, and NATIONAL ASSOCIATION OF ROYALTY OWNERS, INC., Amicus Curiae. ATLANTIC RICHFIELD COMPANY, Plaintiff-Counter-Defendant-Appellee, v. THE FARM CREDIT BANK OF WICHITA, formerly known as the Federal Land Bank of Wichita; STANLEY A. MOLLERSTUEN; HAL A. McVEY; HELEN D. McVEY, Defendants-Counter-Claimants, and CAROL KOSCOVE, Defendant-Counter-Claimant-Appellant, ALFRED GARCIA; NADDIE GARCIA; EDWARD GARCIA; MARY RUTH; PEGGY GARCIA; JACQUIE GARCIA; CATHERINE VOELKERDING; MANUELITA BECK; ANNA M. MARTINEZ; GERALDINE VELASQUEZ, Intervenors, and NATIONAL ASSOCIATION OF ROYALTY OWNERS, INC., Amicus Curiae. ATLANTIC RICHFIELD COMPANY, Plaintiff-Counter-Defendant-Appellee, v. DARWIN H. SMALLWOOD, Defendant, and THE FARM CREDIT BANK OF WICHITA, formerly known as the Federal Land Bank of Wichita; STANLEY A. MOLLERSTUEN; HAL A. McVEY; HELEN D. McVEY; CAROL KOSCOVE, Defendants-Counter-Claimants, ALFRED GARCIA; NADDIE GARCIA; EDWARD GARCIA; MARY RUTH; PEGGY GARCIA; |
Decision Date | 13 September 2000 |
Docket Number | SALAZAR-TIER,99-1148,Nos. 99-1147,99-1154,99-1183 |
Page 1138
v.
THE FARM CREDIT BANK OF WICHITA, formerly known as the Federal Land Bank of Wichita, Defendant-Counter-Claimant-Appellant,
and
STANLEY A. MOLLERSTUEN; HAL A. McVEY; HELEN D. McVEY; CAROL KOSCOVE, Defendants-Counter-Claimants,
and
NATIONAL ASSOCIATION OF ROYALTY OWNERS, INC., Amicus Curiae.
v.
THE FARM CREDIT BANK OF WICHITA, formerly known as the Federal Land Bank of Wichita; CAROL KOSCOVE, Defendants-Counter-Claimants-Appellees,
and
STANLEY A. MOLLERSTUEN; HAL A. McVEY; HELEN D. McVEY, Defendants-Counter-Claimants,
Page 1139
and
NATIONAL ASSOCIATION OF ROYALTY OWNERS, INC., Amicus Curiae.
v.
THE FARM CREDIT BANK OF WICHITA, formerly known as the Federal Land Bank of Wichita; STANLEY A. MOLLERSTUEN; HAL A. McVEY; HELEN D. McVEY, Defendants-Counter-Claimants,
and
CAROL KOSCOVE, Defendant-Counter-Claimant-Appellant,
and
NATIONAL ASSOCIATION OF ROYALTY OWNERS, INC., Amicus Curiae.
v.
DARWIN H. SMALLWOOD, Defendant,
and
THE FARM CREDIT BANK OF WICHITA, formerly known as the Federal Land Bank of Wichita; STANLEY A. MOLLERSTUEN; HAL A. McVEY; HELEN D. McVEY; CAROL KOSCOVE, Defendants-Counter-Claimants,
and
NATIONAL ASSOCIATION OF ROYALTY OWNERS, INC., Amicus Curiae.
APPEAL FROM UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO (D.C. No. 95-Z-1767)
Page 1140
Page 1141
Page 1142
Page 1143
Page 1144
Page 1145
Steven R. Rider (E. Dwight Taylor with him on the brief), Rider & Woulf, P.C., of Aurora, Colorado, for The Farm Credit Bank of Wichita.
Anthony J. Shaheen (Gail L. Wurtzler, Charles L. Kaiser, and William A. Bianco with him on the brief), Davis, Graham & Stubbs LLP, of Denver, Colorado, for Atlantic Richfield Company.
George W. Mueller, Burns, Wall, Smith and Mueller, P.C., of Denver, Colorado, for Carol Koscove.
H. Paul Cohen (Thomas W. Niebrugge, Lindquist, Vennem & Christensen, with him on the brief), of Denver, Colorado, for Alfred Garcia, Naddie Garcia, Edward Garcia, Mary Ruth Salazar-Tier, Peggy Garcia, Jacquie Garcia, Catherine Voelkerding, Manuelita Beck, Anna M. Martinez, and Geraldine Velasquez.
Robin Stead and Donald F. Heath, Jr., Stead & Heath, P.C., of Oklahoma City, Oklahoma, on the brief for National Association of Royalty Owners, Inc., amicus curiae.
Before BRISCOE, McWILLIAMS, and ALARCON1, Circuit Judges.
BRISCOE, Circuit Judge.
This complex litigation involves several oil and gas leases. The lessee, plaintiff Atlantic Richfield Company ("ARCO"), filed a claim for declaratory relief. The defendant lessors the Farm Credit Bank of Wichita ("FCB"), Carol Koscove ("Koscove"), and members of the Garcia family ("the Garcias") countered by filing a variety of counterclaims against ARCO. The district court issued a series of rulings resolving all of the parties' claims prior to trial. ARCO appeals three of these rulings, and the defendants appeal at least seven others. We exercise jurisdiction pursuant to 28 U.S.C. § 1291, affirm in part, and reverse in part.2
Page 1146
I. BACKGROUND
In the 1970s, ARCO discovered that carbon dioxide ("CO2") can be used to increase recovery from certain types of oil reservoirs. This process is commonly referred to as "tertiary recovery" or "enhanced oil recovery" ("EOR"). Joint Appendix ("Jt. App.") at 95-96 (¶¶ 22-23), 2447 (¶ 5), 7106-07. In 1975, ARCO acquired oil and gas leases for lands in Huerfano County, Colorado with the potential for CO2 production. FCB, Koscove, and the Garcias own royalty interests in these leases, which were unitized3 into a "Sheep Mountain Unit" ("SMU") for the exploration, development, and production of CO2. Id. at 97 (¶ 27), 1700. Because the nearest market is approximately 400 miles away, ARCO constructed a pipeline (the "Pipeline") to transport the CO2 from the SMU to the Permian Basin in West Texas.
The parties' leases provide the starting point for all royalty calculations. The Garcias' lease expressly contemplates some form of a transportation deduction and states that royalties shall be based on market values determined "at the mouth of the well":
If Lessee sells gas at the mouth of the well, Lessee shall pay Lessor as royalty 1/8 of the proceeds from such sale. If Lessee sells gas at a point other than at the mouth of the well, Lessee shall pay Lessor as royalty on said gas 1/8 of the proceeds from such sale, after deducting from such proceeds the reasonable cost of preparing said gas for market, including but not limited to the cost of any necessary compression and the cost of transporting said gas to the point of sale. Where gas is not sold by Lessee, but is used by Lessee for any purpose other than the manufacture of gasoline or any other product, Lessee shall pay Lessor as royalty on said gas 1/8 of the market value of said gas, said value to be determined at the mouth of the well, and in determining said market value, there shall be deducted any cost of any necessary compression, the cost of transporting said gas to the point of use, and any other reasonable cost for preparing such gas for use.
Id. at 276. FCB's lease is silent on the deductibility of transportation expenses. Like the Garcias' lease, however, the 1975 version of FCB's lease states that royalties shall be based on market values determined "at the mouth of the well":
The lessee shall pay to lessor for gas produced from any oil well and used by the lessee for the manufacture of gasoline or any other product as royalty 1/8 of the market value of such gas at the mouth of the well: if said gas is sold by the lessee, then as royalty 1/8 of the proceeds of the sale thereof at the mouth of the well.
Id. at 345. FCB's lease was amended and "corrected" in 1977. Among other things, the corrected amendment changes the royalty rate from 1/8 to 3/16, id. at 348, and adds a provision entitled "Gas Pricing":
Anything to the contrary above stated notwithstanding, the price which Lessee shall pay for gas produced pursuant to this lease when Lessor is not exercising its option to take in kind shall be respectively for each chemical or generic type of gas (for example, carbon dioxide gas, or hydrocarbon gas, etc.), as the case may be, the highest current market price at the time the gas is produced and sold of (1) the highest paid in Huerfano County, (2) the current market price established by the Federal Government for its share of the gas, or (3) the amount received by Atlantic for its share of the gas.
Page 1147
Id. at 352. The amendment also inserts the following language into the lease's granting clause: "The word 'gas' as used in this lease shall include gases of all kinds, whether hydrocarbon gas or gases or nonhydrocarbon gas or gases, including but not limited to carbon dioxide gas, and any mixture or mixtures of any such gases." Id. at 348.
In addition to the lease contracts, the question also arose as to whether ARCO's relationship with the Exxon Company ("Exxon") affected the parties' royalty obligations. ARCO executed an "Agreement on Principles" ("AOP") in 1981 that conveyed to Exxon a 50% interest in the Pipeline and the CO2 produced at the SMU. Id. at 4025, 4030. Under the AOP, ARCO pays all royalties on CO2 produced at the SMU. Exxon then reimburses ARCO for royalties paid on Exxon's share of the gas. Exxon agreed in the AOP to pay the first $128.7 million to develop the SMU facilities, the first $120 million to develop the Pipeline, and 50% of all costs thereafter.4 By the defendants' calculation, ARCO ultimately contributed less than $50 million in capital toward the SMU and the Pipeline. This $50 million contribution represented about 15% of the companies' combined capital expenditure, which amounted to more than $285 million.
As intended, CO2 from the SMU is sold, used in kind, or exchanged to increase oil production in West Texas. To determine the "wellhead" value of the CO2 and the lessors' royalties, ARCO uses a "work back" or "net back" method. ARCO calculates the wellhead value of the CO2 by subtracting transportation and conditioning costs from the value of the CO2 in the West Texas market. The costs deducted by ARCO fall into three categories: (1) operations and maintenance costs; (2) depreciation costs, which include interest during construction ("IDC"); and (3) cost of capital ("COC"). ARCO defines IDC as the cost of money used to build a facility, or the "[i]nterest charged on the investments made prior to commencement of operations." Id. at 2787, 2917. ARCO defines COC as the "opportunity cost" of capital, including the cost of building a facility through debt or equity financing. Id. at 2923-24, 2963. In other words, COC is "the rate of return that is required to induce investors to...
To continue reading
Request your trial-
Peña v. Greffet, CIV 12–0710 JB/KBM.
...under rule 12(b)(6) also govern a motion for judgment on the pleadings under rule 12(c). See Atl. Richfield Co. v. Farm Credit Bank, 226 F.3d 1138, 1160 (10th Cir.2000). Under rule 12(b)(6), a court may dismiss a complaint for "failure to state a claim upon which relief can be granted." Fed......
-
Reams v. City of Frontenac, 20-cv-02133-TC
...separately," meaning that "the denial of one does not require the grant of another." Atl. Richfield Co. v. Farm Credit Bank Wichita , 226 F.3d 1138, 1148 (10th Cir. 2000). For each motion, the moving party bears the initial burden of showing the absence of any genuine issue of material fact......
-
Elliott Industries Ltd. Part. v. Bp America Prod., 04-2006.
...Inc. v. North River Ins. Co., 127 N.M. 1, 976 P.2d 1, 12 (1999). 12. See, e.g., Atl. Richfield Co. v. Farm Credit Bank of Wichita, 226 F.3d 1138, 1152-53 (10th Cir.2000) (recognizing that analysis of whether certain expenses qualify as deductible transportation costs depends, at least in pa......
-
Caldwell v. Univ. of N.M. Bd. of Regents, CIV 20-0003 JB/JFR
...a rule 12(b)(6) motion apply to a motion for a judgment on the pleadings. See Atlantic Richfield Co. v. Farm Credit Bank of Wichita, 226 F.3d 1138, 1160 (10th Cir. 2000) ("A motion for judgment on the pleadings under Rule 12(c) is treated as a motion to dismiss under rule 12(b)(6)."). Thus,......
-
BES Design/Build, LLC v. The United States, 19-1892C
...Cir. 1997); B.F. Goodrich Co. v. U.S. Filter Corp., 245 F.3d 587, 593 (6th Cir. 2001); Atl. Richfield Co. v. Farm Credit Bank of Wichita, 226 F.3d 1138, 1148 (10th Cir. 2000); Chevron USA, Inc. v. Cayetano, 224 F.3d 1030, 1037 n.5 (9th Cir. 2000), cert. denied, 532 U.S. 942 (2001); Allstate......
-
California v. United States, No. 17-206C
...at 968-69; B.F. Goodrich Co. v. U.S. Filter Corp., 245 F.3d 587, 593 (6th Cir. 2001); Atl. Richfield Co. v. Farm Credit Bank of Wichita, 226 F.3d 1138, 1148 (10th Cir. 2000); Chevron USA, Inc. v. Cayetano, 224 F.3d 1030, 1037 n.5 (9th Cir. 2000), cert. denied, 532 U.S. 942 (2001); Bubble Ro......
-
Gerald v. Locksley, No. CIV 10-0721 JB/LFG
...he need not set forth allegations regarding these matters in his complaint. See Atlantic Richfield Co. v. Farm Credit Bank of Wichita, 226 F.3d 1138, 1169 n.16Page 81(2000)("Federal Rule of Civil Procedure 8(c) requires a defendant to plead . . . any . . . affirmative defense in his answer ......
-
Harjo v. City of Albuquerque, CIV 16-1113 JB/JHR
...a 12(b)(6) motion apply to a motion for a judgment on the pleadings. See Atlantic Richfield Co. v. Farm Credit Bank of Wichita, 226 F.3d 1138, 1160 (10th Cir. 2000)("A motion for judgment on the pleadings under Rule 12(c) is treated as a motion to dismiss under rule 12(b)(6)."). Thus, the C......
-
Introduction
...did not err in excluding expert testimony regarding the issue of self-defense. Atlantic Richfield Co. v. Farm Credit Bank of Wichita, 226 F.3d 1138, 1164 (10th Cir. 2000). Court did not abuse discretion in granting motion in limine excluding testimony of economist on fair market value of ca......