Jicarilla Apache Tribe v. Supron Energy Corp., 75-247-M Civil.

• Court: U.S. District Court — District of New Mexico
• Writing for the Court: Campbell & Black, P.A., Bruce D. Black, Santa Fe, N.M., for Supron Energy Corp
• Citation: Jicarilla Apache Tribe v. Supron Energy Corp., 479 F.Supp. 536 (D. N.M. 1979)
• Decision Date: 05 November 1979
• Docket Number: No. 75-247-M Civil.,75-247-M Civil.
• Parties: The JICARILLA APACHE TRIBE, Plaintiff, v. SUPRON ENERGY CORPORATION et al., Defendants.

479 F. Supp. 536

The JICARILLA APACHE TRIBE, Plaintiff, v. SUPRON ENERGY CORPORATION et al., Defendants.

No. 75-247-M Civil.

United States District Court, D. New Mexico.

November 5, 1979.

COPYRIGHT MATERIAL OMITTED

Nordhaus, Moses & Dunn, Robert J. Nordhaus, B. Reid Haltom, Peter E. Springer, Albuquerque, N.M., for plaintiff.

Campbell & Black, P.A., Bruce D. Black, Santa Fe, N.M., for Supron Energy Corp.

Modrall, Sperling, Roehl, Harris & Sisk, John R. Cooney, Peter J. Adang, Susan R. Stockstill, Albuquerque, N.M., for Southland Royalty Co.

Hinkle, Cox, Eaton, Coffield & Hensley, Harold L. Hensley, Jr., J. Douglas Foster, Roswell, N.M., Baker & Botts, Frank G. Harmon, Houston, Tex., for Exxon Co., U.S.A.

R. E. Thompson, U.S. Atty., James B. Grant, Raymond Hamilton, Special Asst. U.S. Attys., Albuquerque, N.M., for Cecil Andrus, Secretary of Interior.

Montgomery, Andrews & Hannahs, P.A., Gary R. Kilpatric, Santa Fe, N.M., for third-party defendant Gas Company of New Mexico.

MEMORANDUM OPINION

MECHEM, District Judge.

There having been a bench trial on the merits in this action in May and June, 1979, the following shall constitute my Findings of Fact and Conclusions of Law, pursuant to Rule 52 of the Federal Rules of Civil Procedure.

Plaintiff, The Jicarilla Apache Tribe (Tribe), in its Second Amended Complaint seeks treble damages based on alleged antitrust violations as well as damages and an accounting based on alleged breaches of the several leases which are the subject matter of this litigation. Defendants to these claims are Supron Energy Corporation, formerly Southern Union Production Company (Supron), Southland Royalty Company, formerly Aztec Oil and Gas Company (Southland or Aztec), and Exxon Company, U.S.A., formerly Humble Refining Company (Exxon). Not all of plaintiff's several claims are lodged against each of these defendants-lessees, as is more fully set out below.

Gas Company of New Mexico, formerly Southern Union Gas Company (GCNM or SUG), and Southern Union Gathering Company (SUGC), both wholly owned subsidiaries of Southern Union Company (Southern Union), originally were named defendants to this action. GCNM and SUGC effected a settlement agreement with the Tribe in late 1976. GCNM remains a third-party defendant to this action by virtue of a cross-claim lodged by Southland alleging a claim of indemnity under the gas purchase contract effected between these two companies for excess royalties Southland may be found to owe the Tribe.

Also a named defendant is Cecil Andrus, Secretary of the Interior (Secretary), by virtue of the Tribe's claim that the Secretary has breached his fiduciary obligation to the Tribe arising under provisions of the several leases which are the subject matter of this litigation. As to the defendant Secretary, the Tribe seeks declaratory judgment that the alleged breach of fiduciary duty in fact occurred as well as an accounting for royalties allegedly owing by defendants-lessees which the Secretary and his named representatives have failed to secure for the Tribe under the leases in question.

Plaintiff, at the trial on the merits in this action, moved to conform its pleadings to the evidence, which motion was granted. Accordingly, issues raised at trial which were not set out in plaintiff's Second Amended Complaint will be considered in addition to the issues raised therein. Plaintiff's claims have been at times as the shifting sands. Any issues plaintiff claims to have raised which are not considered in this Opinion are deemed to have fallen of their own weight or lack thereof.

Plaintiff is an Indian Tribe organized and incorporated under the laws of the United States of America, 25 U.S.C. 476-7, residing on an Executive Order Reservation in Rio Arriba and Sandoval Counties in Northern New Mexico. Defendants Supron, Southland and Exxon are foreign corporations qualified to do business or doing business in New Mexico who have their principal places of business outside the State of New Mexico. Subject matter jurisdiction is proper pursuant to 28 U.S.C. 1331(a) and 1362, 5 U.S.C. 701-06 and 15 U.S.C. 15.

Defendant Supron, whose name was changed from Southern Union Production Company in April, 1977 by action of its stockholders, was originally an inactive corporation which was a wholly owned subsidiary of Southern Union. Southern Union's ownership of Supron's stock was reduced to approximately 70% in the early 1970's and further reduced to approximately 28% in December of 1976. Defendant Southland acquired Aztec by merger subsequent to the filing of the original complaint in this action in which Aztec was a named defendant. Southland succeeded to this litigation by virtue of the merger. Aztec was originally organized in 1950 as a wholly owned subsidiary corporation of Southern Union and was subsequently spun off in 1954. SUGC was organized as a wholly owned subsidiary of Southern Union in 1953 and remains such to date.

From the year 1950 to the present, the Tribe has been lessor and royalty-interest owner of oil and gas leases approved by the Secretary of the Interior on the Tribe's Reservation lands in the San Juan Basin. The leases which are the subject of this litigation are Jicarilla Lease Nos. 10, 47, 100, 101, 103-107, 145, 150, 153, 397 and 416-18. In 1950, SUG became the original lessee of leases numbered 10, 100, 101, 103 through 107, 145, 150 and 153. On May 20, 1952, SUG assigned separate undivided one-half interests in leases 104 and 107 to Humble Oil Company (Exxon). On January 1, 1956, Exxon contracted to sell natural gas produced from leases 104 and 107 to SUG. Sales of natural gas continue to be made pursuant to this contract, as amended, to date. Exxon assigned its undivided one-half interest in lease 107 to Billy J. Knott effective February 9, 1973, reserving all leasehold rights below the base of the Dakota formation. Exxon's conveyance to Knott was approved by the Bureau of Indian Affairs (BIA) in May of 1979, effective retroactive to the date of conveyance.

On January 1, 1955, SUG assigned separate undivided one-half interests in leases 100, 101, 103, 105, 106, 145, 150 and 153 to Aztec, at that time a wholly owned subsidiary company of SUG. Aztec acquired leases numbered 397 and 416 through competitive lease sales in 1966 and 1969 respectively. Aztec and Southland have sold natural gas produced from their leases to SUG pursuant to a gas purchase contract executed December 12, 1953, as amended. On January 1, 1961, SUG assigned its rights in leases 10 and 47 and separate undivided one-half interests in leases 100, 101, 103-107, 145, 150 and 153 to Supron, at that time a wholly owned subsidiary of SUG. On that same date, Supron executed a gas purchase contract with SUG for sale of natural gas from the leases assigned to it. Two additional gas sales contracts were executed between Supron and SUG regarding sales from additional properties previously owned by SUG assigned to Supron. Supron acquired leases 417 and 418 through competitive lease sales in May of 1969. Numerous additional gas contracts have been evidenced throughout these proceedings but need not be particularly delineated here. Suffice it to say that the numerous dealings between and among the defendant energy companies and others have been commensurate with the complexities generally associated with the oil and gas industry.

The contractual relations of the Tribe and defendants-lessees are governed by the provisions of Standard Lease Form 157 entered into on behalf of the Tribe by the Secretary pursuant to federal statutes, 25 U.S.C. § 396a et seq., and federal regulations, 25 CFR Part 171 and 30 CFR Part 221. Under the terms of the lease and the applicable federal statutes and regulations, the Secretary has the duty and the jurisdiction to determine whether lessees are performing according to the terms and conditions of leases on Indian lands and to determine the "value" of any minerals produced for purposes of computing royalties to be paid by the lessees.

Prior to its institution of this action, the Tribe demanded in 1973 that the Secretary take appropriate and necessary action to make determinations required of him under the terms of the lease and to require lessees to perform their obligations as denominated in the lease provisions. The Tribe has continued to demand action of the Secretary since 1973. When it became clear to the Tribe that, in its opinion, its demands would not be heeded by the Secretary, it instituted this action in 1975. In addition to its demands on the Secretary, the Tribe has previously demanded of defendants-lessees that they pay royalties on gas produced based on the actual value of such gas, that they account separately for liquid hydrocarbon substances as required by the lease terms, that they drill such offset wells as are necessary to protect lease lands from drainage, and that they exercise reasonable diligence in the development of oil and gas, while products can be secured in paying quantities, of leases held by these lessees on Reservation lands. The Secretary has assigned responsibility for the leases in question to the Area Oil and Gas Supervisor of the United States Geological Survey (USGS) who has been stationed at various times in Roswell and Albuquerque, New Mexico and Durango, Colorado.

THE TRIBE'S ANTITRUST CLAIMS

The Tribe's antitrust claims are several. It claims Supron monopolized the market for liquid hydrocarbons in restraint of trade and in violation of Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1, in light of Supron's operation of the Lybrook Gasoline Extraction Plant from 1971 to 1976. It claims that the contract agreement entered into between Supron and SUG unlawfully fixed the price of liquid hydrocarbons in restraint of trade; that Southland and SUG unlawfully fixed the price of natural gas pursuant to gas purchase contracts effected between them on December 31, 1953 and January 2, 1954; that Supron...