The Tenth U.S. District Court of Appeals recently ruled Chevron Corp. subsidiary Noble Energy Inc. didn’t have to pay millions of dollars in additional royalties in a fight with Phelps Oil and Gas LLC of Colorado.
Phelps had filed a class action lawsuit against Noble, alleging underpayment of royalties. Noble produces natural gas from land it leases from Phelps Oil and Gas and paid royalties to Phelps on 100% of the proceeds from gas sales.
According to the court ruling, the dispute centered on the interpretation of a prior settlement agreement, the Holman Settlement, which outlines the royalty calculation method. Phelps claimed Noble failed to pay royalties on $34 million from a DCP Midstream, LP audit and $17.5 million that DCP promised to invest in infrastructure.
In an earlier ruling the U.S. District Court for the District of Colorado had granted summary judgment in favor of Noble. The court found that Noble was not obligated to pay royalties on the $34 million because DCP never returned those proceeds to Noble. Regarding the $17.5 million, the court held that Phelps failed to show that the promise had value to Noble beyond increased production and resulting revenues.
The United States Court of Appeals for the Tenth Circuit reviewed the case. The court affirmed the district court’s decision, agreeing that Phelps did not present evidence that DCP returned any proceeds to Noble related to the $34 million. The court also upheld the summary judgment on the $17.5 million claim, finding that Phelps could not demonstrate that the promise provided any additional benefit to Noble aside from increased production and revenues, which Noble had already accounted for in its royalty payments.
The Tenth Circuit concluded that Phelps failed to create a genuine issue of material fact regarding Noble’s obligation to pay additional royalties under the Holman Settlement. The court affirmed the district court’s judgment in favor of Noble Energy, Inc.
Source: Justia US Law
