Gas Contract Dispute
The Texas Supreme Court recently held that Apache Corporation could not seek recovery for a large volume of "unaccounted-for" gas lost between the wellhead and sale to customers at the gas processing facility (Dynergy Midstream Services, et al., v. Apache Corporation, Case No. 07-0043). It based its decision on the contract language, which focused on the volume of gas sold to the customer - and not the volume of gas delivered to the processing facility.
"When calculating the proceeds due to Apache under these 'percentage of proceeds' contracts, only one criterion matters: sales. Common throughout the natural-gas industry, these contracts unambiguously base payment on the amount of gas ultimately sold at the tailgate (not the amount initially delivered at the wellhead), and Apache admits that it was paid in full for 'every molecule of gas' sold at the tailgate of the processing plants."
If you are interested, the Supreme Court's website contains electronic versions of the briefs filed in the suit, as well as audio of the oral argument (that is, in addition to the decision itself). Very nice.
