Bayou Bouillon Corp. v. Atlantic Richfield Co.
| Citation | 385 So.2d 834 |
| Decision Date | 05 May 1980 |
| Docket Number | No. 13229,13229 |
| Parties | BAYOU BOUILLON CORPORATION et al. v. ATLANTIC RICHFIELD COMPANY. |
| Court | Court of Appeal of Louisiana (US) |
Jack C. Caldwell, Franklin, for plaintiff-appellant Bayou Bouillon Corporation, et al.
Robert T. Jorden, Lafayette, for defendant-appellee Atlantic Richfield Co.
Robert G. Haik, New Orleans, for the Succession-appellee Administrator of the Succession of Penelope Dickey Humes, No. 9658, St. Mary Parish, State of Louisiana.
Before EDWARDS, LEAR and WATKINS, JJ.
Bayou Bouillon Corporation and twenty other individually named plaintiffs, hereinafter as an aggregation termed Bayou, filed suit against defendant, Atlantic Richfield Company, hereinafter AR, seeking cancellation of oil, gas and mineral leases granted by Bayou to AR, payment of sums allegedly past due under the leases, and $50,000 in attorney fees. From a trial court judgment rejecting all plaintiff's claims, Bayou appeals. We affirm.
By instruments dated February 6, 1964, September 7, 1965, and June 12, 1972, Bayou granted oil, gas and mineral leases to AR (or its ancestor, Atlantic Refining Company) on properties in Iberville Parish.
Royalty provisions in the 1965 and 1972 leases were similar save for the fact that in the 1972 lease the royalty share was 1/5.
In late 1973, Mr. F. W. Miller, president of Bayou, became aware of a discrepancy in AR's royalty payments and notified Mr. Jack C. Caldwell, counsel for Bayou, who telephoned AR in December.
By letter dated January 9, 1974, AR revealed that certain oil had been paid for at the incorrect rate of $3.43 per barrel rather than at the proper rate of $4.03 per barrel. AR noted that the error dated from April, 1973, and stated that supplemental payments to Bayou would be made "promptly." By way of explanation, the letter stated:
On February 8, 1974, Bayou demanded by letter that AR cancel the leases and make payment for all past due royalties or face suit. AR refused to comply and the present litigation ensued.
Bayou appeals the trial court judgment rejecting all its demands and specifies three errors:
1. It was error to find that oil royalty payments to Bayou were subject to federal price regulations.
2. It was error to apply provisions of the Louisiana Mineral Code to this case.
3. It was error not to find that AR had actively breached its obligations to pay royalties timely.
Bayou, on appeal, urges that federal energy regulations adopted in 1973 have no bearing on this case. Appellant maintains that pricing difficulties, regardless of their complexity, cannot justify the proven delay in royalty payments. Further, Bayou demands that because AR chose to keep all the oil produced and to exchange it with other companies, the price paid must, pursuant to the lease and despite ceiling prices, be "the highest posted price in the field." We find these arguments to have no merit.
Comprehending the applicability and complexity of federal energy regulation necessitates both a stroll down the tortuous legislative path and a review of legal challenges so numerous as to require the establishment of a Temporary Emergency Court of Appeals.
Section 753(a) of the Emergency Petroleum Allocation Act of 1973, 15 U.S.C. § 751 et seq., provided that the President shall promulgate regulations for the mandatory allocation of crude oil and each refined petroleum product in amounts and at prices specified. The purpose was to provide for
"equitable distribution of crude oil, residual fuel oil, and refined petroleum products at equitable prices among all regions and areas of the United States and sectors of the petroleum industry(.)" 15 U.S.C. § 753(b)(1) (F).
To accomplish this, President Nixon established 1 the Federal Energy Office (FEO) and delegated to it his authority under 1) section 203(a)(3) of the Economic Stabilization Act of 1970 (12 U.S.C. § 1904 note); 2) 15 U.S.C. § 751 et seq.; and 3) the Defense Production Act of 1950 (50 U.S.C.App. § 2061 et seq.).
Centralization of petroleum allocation and pricing was completed when the Cost of Living Council (CLC) delegated 2 its crude oil and petroleum products price stabilization authority under the Economic Stabilization Act of 1970 to the FEO. 3
In an attempt to minimize the inflationary impact of rapidly rising world-wide oil prices and at the same time to provide an incentive for increased domestic production of crude oil, the CLC had established a "two-tier" pricing system for crude oil. 4
The basic applicable "two-tier" regulations, as originally established by the CLC and adopted by the FEO, provided as follows:
(1) if crude petroleum was produced and sold from that property in every month of 1972, the total number of barrels of domestic crude petroleum produced and sold from that property in the same month of 1972;
(2) if domestic crude petroleum was not produced and sold from that property in every month of 1972, the total number of barrels of domestic crude petroleum produced and sold from that property in 1972 divided by 12.
'Property' is the right which arises from a lease or from a fee interest to produce domestic crude petroleum.
Essentially, the amount by which the total number of barrels of oil produced and sold exceeded the base production control level for that month was "new" oil which might be sold without respect to the ceiling price.
Additional regulations further complicated matters. Stripper wells, those producing less than ten barrels per day, were exempt from allocation or price controls. 5
Released crude oil was a recharacterization of oil otherwise classified under the base production control level. Released crude could, under certain conditions, be sold at above ceiling price levels according to a complex formula resulting in ever changing prices. 6
Bayou urges that none of these regulations were applicable prior to February 1, 1976, when 10 C.F.R. 212.72 was amended to add a new definition:
(Emphasis added).
It is contended that inasmuch as "royalty owner" was not added until 1976, federal price regulations do not apply in this case. We disagree.
Clearly, 10 C.F.R. 212.73, as worded, applies to oil producers. Furthermore, 10 C.F.R. 212.31 defined "producer" as:
In addition to the statutory provisions, case law has consistently characterized royalty owners as producers. See City of Los Angeles, Los Angeles, California (FEA-0981) 5 FEA No. 80,581 (1977); Colorado State Board of Land Commissioners, Denver, Colorado (FEA-0974) 5 FEA No. 80,529 (1977).
The constitutionality of applying FEO's "two-tier" price controls to non-operating royalty owners was at issue in Griffin v. U. S., 537 F.2d 1130 (Temp. Emerg. Ct. of Appeals 1976), cert. denied 429 U.S. 919, 97 S.Ct. 313, 50 L.Ed.2d 286 (1976). While the case did not directly involve the regulations' applicability, the court, in finding the regulations constitutional and not a taking, unequivocably determined that federal price controls applied to royalty oil. 7
Bayou's citation of Mobil Oil Corporation v. Federal Power Commission, 463 F.2d...
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