FEDERAL ROYALTY LITIGATION UPDATE

• Jurisdiction: United States

Federal and Indian Oil and Gas Royalty Valuation and Management Vol. 1
(Jan 1992)
CHAPTER 14A
FEDERAL ROYLATY LITIGATION UPDATE
Hugh V. Schaefer
Gorsuch, Kirgis, Campbell, Walker and Grover
Denver, Colorado

ADDENDA

This Addenda will bring current and add some additional cases dealing with federal and Indian royalty valuation litigation. Updates will be by reference to the paragraph number of the case as it appeared in the materials which you received in the Institute manual.

2. Mesa Operating Limited Partnership v. United States Department of Interior

Mesa's petition for a Writ of Certiorari was denied by the United States Supreme Court on January 21, 1992.

6. Phillips Petroleum Company v. Lujan No. 90-5122 (10th Cir.).

Phillips filed a petition for rehearing on January 15, 1992.

7. Phillips Petroleum Company v. Lujan, No. 98-C-887-B, Consolidated with Atlantic Richfield Company v. Lujan, Jr. et al., No. 89-C-1052-B, appeals pending Nos. 91-5071 and 915072 (10th Cir.)

The office of the Solicitor stated in its oral presentation at the Special Institute that it is their position that the audit began at the time of the receipt of the notice rather than at the time of actual commencement of the review of royalty payments.

8. Phillips Petroleum Company v. Kelly, et al., CA-389-1707H, consolidated with, CA-3-892393H, CA-3-89-2727-H and CA-3-89-2751H (N.D. Tx.)

The office of the Solicitor, United States Department of Interior disagrees with the characterizations of "retroactive valuation" and "self-audit". The Department of Interior regards its effort as "restructured accounting".

9. Atlantic Richfield Company v. Lujan, Jr., et al., No. 89-C0892-B (N.D. Okla.)

This case does not involve the processing allowance issue of actual cost versus automatic 2/3 allowance.

10. Conoco Inc. v. United States of America, C.A. No. 643-89L

This case involves a claim for judicial review of the Arco case discussed under Item #8. The case involves a review of the decision of the Interior Board of Land Appeals in Conoco, Inc. and Arco Oil and Gas Company, 110 IBLA 232 (1989).

[Page 14A-ii]

13. Kidde Industries v. Lujan, Jr., et al., No. 90-1063 J (D. Ut.).

The Kidde case has been refiled in Federal District Court in Utah under the name Badger Oil Corporation v. Kidde Industries, Inc. and Lujan, Jr. et al. No. 91-C-421G. This case involves issues of right to immediate judicial review without exhaustion of administrative remedies, constitutionality of federal royalty regulations, both facially and as applied, constitutionality of audit procedures and dual accounting methodology on Indian leases. Retroactive evaluation is also involved. The refiled suit was brought by the lessees and not by the payor.

Additional Pending Cases

I. Other Statute of Limitations Cases

1. Phillips Petroleum Co. v. Kelly, No. CA3-89-2670H (N.D. Tex.).

This case involves an order to value production from a well on an offshore lease at the NGPA section 102 price rather than the section 104 price, and to perform a limited restructured accounting on that lease only from October 1, 1980 forward. Plaintiff also asserts that the statute of limitations bars any claim for periods more than 6 years before the date of the order.

2. Phillips Petroleum Co. v. Lujan, Civil No. 89-C-914 B (N.D. Okl.)

This case involves a September 26, 1989 order to pay royalties due under an Indian allotted lease for the production months July, August, and September, 1983. The statute of limitations is the only issue in this case. Even under the plaintiff's view that the statute runs six years from when a payment is due, the order was issued within that time for two of the three months involved. The district court not only agreed with plaintiff's theory, but also concluded that the portion of the order which was timely when it was issued became untimely while the action for judicial review was pending, because the government did not file a separate action or counterclaim to collect. The government's motion to alter or...