Justia Energy, Oil & Gas Law Opinion Summaries

Petitioner power companies sought a writ of prohibition in connection with a ruling of the circuit court denying petitioners' motion to dismiss a breach of contract complaint filed against them by respondents, Shell Equipment and Shell Energy, as being barred by the statute of limitations. Petitioners argued that the trial court erred in ruling that the limitations period applicable to contracts for the sale of goods under the UCC does not apply to the coal sales agreement they entered into with Shell Equipment. The Supreme Court granted the writ of prohibition, finding that petitioners demonstrated clear legal error for which they were entitled to relief. The Court determined that the subject agreement constituted a sale of goods under W.V. Code 46-2-107(1), and, as a result, the four-year statute of limitations established by the UCC for the sales of goods was controlling. Because respondents did not initiate the lawsuit until after the limitations period had expired, the trial court committed error in failing to grant petitioners' motion to dismiss.

Gas producers that lease land from Alaska must pay royalties calculated on the value of the gas produced from the leased area. The royalty may be calculated in one of two methods: the “higher of” pricing or contract pricing. “Higher of” pricing is the default method of calculating royalties and is calculated using market data and the prices of other producers. The Department of Natural Resources (DNR) usually does not calculate the royalty payments under “higher of” pricing until years after production. Under contract pricing, the lessee’s price at which it sells gas is used to determine the royalty payment. Appellant Marathon Oil requested contract pricing from 2008 onward and sought retroactive application of contract pricing for 2003-2008. The DNR approved contract pricing from 2008 onward but denied the retroactive application. The superior court affirmed the DNR’s decision. On appeal to the Supreme Court, Marathon argued that the statute that governs contract pricing permitted retroactive application of contract pricing. Upon review of the arguments and the applicable legal authority, the Supreme Court concluded that though the statute was ambiguous, it would defer to the DNR’s interpretation. Accordingly, the Court affirmed the superior court’s decision to uphold the DNR’s order.

Sunoco, the owner and operator of several petroleum-refining facilities, purchased electric service from Toledo Edison. The contract between the two companies permitted arrangements that differed from the standard rate schedules. BP Oil Company, which owns a competing refined located next to Sunoco's refinery, also had a contract with Toledo Edison. Both contracts contained 'most favored nation' clauses, which allowed Sunoco and BP to utilize any "arrangement, rates or charges" for their facilities that Toledo Edison had given to the other. At issue was whether Sunoco could invoke the clause to extend the duration of its contract with Toledo Edison to match the duration of BP's contract with Toledo Edison, which would result in a $13 million savings for Sunoco. The commission found the clause did not allow Sunoco to extend the duration of its contract. The Supreme Court reversed, holding that under the plain language of the clause, the word "arrangement" encompasses all non-price terms of a competitor's contract. Because duration is a non-price term of contract, it is subject to the clause.

In 2004, Plaintiff-Appellant Vick Hubbard filed suit against Defendants Kaiser-Francis Oil Company, Texas Southwest Gas and GBK Corporation for breach of an oil and gas lease and a gas purchase contract. Pursuant to 12 OS Supp. Sec. 1101.1(B), Defendants offered Plaintiff $275 for each of the seven alleged breaches. Plaintiff did not accept the offers and did not submit a counteroffer. By the statute, the offers were deemed rejected. Defendants moved for summary judgment that was granted and entered by the trial court. Plaintiffs appealed. Thereafter, Defendants filed a joint motion to recover their costs and fees based on Plaintiff's failure to obtain a judgment for more that the combined amount of Defendants' offers. In 2005, the parties reached an agreement on litigation costs and attorney fees that were to be paid by Plaintiff. Plaintiff paid that amount and Defendants withdrew their motion. Because of Plaintiff's appeal, the case was remanded to district court. The parties moved for summary judgment. The court granted Defendants' motion. Judgment for Defendants was entered in 2007. Defendants subsequently filed a supplemental joint combined motion for attorney fees for costs they incurred since 2005. In 2008, the district court granted Defendants' motion. On appeal to the Supreme Court, the issues presented for review were matters of first impression. Of import in this case was: (1) whether Defendants were entitled to attorney fees under Sec. 1101.1 because they received a summary judgment, and (2) whether a judgment that was appealed and remanded negated Defendants' 1101.1 offer of judgment made prior to the appeal. Upon careful consideration of the arguments, the Supreme Court affirmed the lower courts' decisions in this case. The Court held that Defendants were entitled to litigation costs, and that the offer of judgment was applicable throughout the case, including through any appeals and remand.

This case returns from the Fifth Circuit to answer one of three certified questions. Appellee Barnes sought to enforce a Working Interest Unit Agreement (WIUA) and Joint Operating Agreement (JOA) for unpaid royalties as a third-party beneficiary or through privity of estate. Doris Barnes sued individually and as the executrix of the estate of her husband, who was an original signatory to a lease that was later assigned to an oil exploration company. The company created a joint venture to begin drilling on lands covered by Barnes’ lease; partner to this joint venture included Appellant Tawes. When the joint venture went bankrupt, Barnes settled her unpaid royalties with the venture. Tawes did not join in the settlement, which gives rise to Barnes’ current claim for the balance of the unpaid royalties. Arguing that because the Bankruptcy Court and Federal District Court concluded that Barnes was a third-party beneficiary to the JOA’s Royalty Provision, Barnes brought suit to enforce, and Tawes appealed. On certification from the Fifth Circuit, the Supreme Court concluded that Barnes had no right to enforce agreements that gave rise to this suit, finding that the original lease assignment to the exploration company did not extend to Tawes. Finding no theory of recovery, the Court did not address the remaining certified questions.

The U.S. Department of Energy entered into standard contracts to accept spent nuclear fuel from utility companies by January 1998 and has not yet accepted delivery, resulting in suits by several nuclear utilities. The district court awarded Dominion damages. The Federal Circuit affirmed, first holding that the Nuclear Waste Policy Act, 42 U.S.C. 10222, permitted assignment by Dominion's predecessor, that the assignment complied with the Act and the contract, and that the assignment included the right to pre-assignment damages. The district court properly denied discovery on the government's claim that Dominion has benefited from its breach because it has not yet been required to pay a one-time fee for disposal of waste generated prior to 1983.