More royalties to be applied to take-or-pay settlements
✍ Scribed by Henke, Michael J.
- Publisher
- John Wiley and Sons
- Year
- 2008
- Weight
- 327 KB
- Volume
- 9
- Category
- Article
- ISSN
- 0743-5665
No coin nor oath required. For personal study only.
✦ Synopsis
erral W. Jones's Dallas Cowboys may have won the 1993 Super Bowl, but a few weeks earlier Jones took his lumps in the Eighth Circuit court of appeals. In Klein v. Jones, Energy Mgmt. [CCHI Paragraph 9121 (November 25, 19921, that court reversed the district court's summary judgment for Jones and allied parties and issued an opinion that is likely to have farreaching results for royalty owners seeking to share in take-or-pay settlements.
Arkla Buys Out Jones at Substantial 3enefit In 1981, Jones and his partner, Michael V. McCoy, formed Arkoma Production Co. as an Arkansas corporation. The following year Arkoma purchased a leasehold interest from Arkla Inc. in the Aetna and Cecil Fields, agreeing t o spend $30 million to drill gas wells there. In general, the leases required payment to the lessor, as royalty, of one-eighth of the value of gas "produced from said land and sold or used by lessee." Soon after the 1982 transaction, Jones became a member of the board of Arkla.
On February 24, 1983, Arkoma and Arkla executed a gas purchase contract covering new wells in the Aetna and Cecil Fields. Arkla agreed to pay Arkoma the maximum lawful price under NGPA Section 102 (then $3.83 a thousand cubic feet) or Section 103, as applicable. The contract included a 75-percent take-or-pay provision.
Arkoma's subsequent drilling program, carried out pursuant to the 1982 purchase contract, NATURAL GAS