Atlantic Richfield Co. v. ANR Pipeline Co.

768 S.W.2d 777, 105 Oil & Gas Rep. 108, 1989 Tex. App. LEXIS 177, 1989 WL 7329
CourtCourt of Appeals of Texas
DecidedFebruary 2, 1989
DocketA14-87-00958-CV
StatusPublished
Cited by8 cases

This text of 768 S.W.2d 777 (Atlantic Richfield Co. v. ANR Pipeline Co.) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Atlantic Richfield Co. v. ANR Pipeline Co., 768 S.W.2d 777, 105 Oil & Gas Rep. 108, 1989 Tex. App. LEXIS 177, 1989 WL 7329 (Tex. Ct. App. 1989).

Opinions

[779]*779OPINION

ROBERTSON, Justice.

This appeal is from a take nothing judgment entered on jury findings in a breach of contract action to recover some $42 million in take-or-pay deficiency payments over a four year period under four natural gas purchase contracts. Appellant insists that the court erroneously had the jury construe the agreements. We agree. Because our construction of the contracts comports with the verdict and judgment, however, we affirm.

I. Factual Background

ARCO, a gas producer, sued ANR, an interstate national gas pipeline, for breach of contract. ARCO alleged that ANR owed $42 million in take-or-pay deficiency payments under four contracts. The four contracts in question were the West Cameron 601 Contract, the Brazos Block 451 Contract, the High Island Block A-563 Contract and the Eugene Island Block 208 Contract. ARCO alleged deficiency payments under the West Cameron and Brazos contracts for the years 1983 through 1986 and deficiency payments under the High Island and Eugene Island contracts for 1985 through 1986. ARCO also sought declaratory relief regarding 30 other contracts — all of the 34 contracts having virtually identical terms. The parties stipulated that the contracts were unambiguous and agreed that this was a simple contract interpretation case. However, they disagreed about the proper interpretation of the contracts on three major points: those provisions concerning (1) royalty, (2) option to reduce the daily contract quantity and (3) force majeure.

Basically, each contract provided ANR would purchase “subject to the other provisions of this Agreement ... during each accounting year the sum of the daily contract quantities” of natural gas. The daily contract quantity was computed on the basis of a percentage of the reserves and was not in dispute. What was in dispute, however, was the “adjusted” daily contract quantities which formed the basis for the final accounting. Each contract provided that if the daily contract quantity was available but not taken by ANR, ANR nevertheless had to pay. At the end of each accounting year the annual contract quantity was computed and the total quantity of gas actually taken was determined. It is for the amounts of gas that ANR had not taken but for which ARCO contended it was owed that ARCO sought payment for in this suit. As stated above, this controversy concerns the interpretation of three provisions of each of the contracts: royalty, option to reduce daily contract quantities and force majeure. The interpretation of these provisions determines the “adjusted” daily contract quantity.

Each of the contracts contained a “Reservations of Seller” provision, the applicable portion of which provided:

Seller hereby expressly reserves and excepts from the terms of this Agreement such portion of the gas produced from the reservoirs subject to this Agreement as Seller’s lessor may be entitled to take or receive under the terms of Seller’s leases....

Each also provided for an “option to reduce the daily contract quantity:”

In the event Seller fails to deliver the volumes requested by Buyer up to one hundred eleven (111) percent of the applicable daily contract quantity for five (5) consecutive days, then at Buyer’s option, commencing with the first day of the month following the end of the fifth day of such failure to deliver and continuing thereafter until adjusted as hereinafter provided, the applicable daily contract quantity may be reduced to ninety (90) percent of the average daily volumes delivered during such five day period.
In the event the daily contract quantity is adjusted downward as provided in this Section 4, then Seller shall have the opportunity to restore all or a portion of such daily contract quantity by written request to Buyer to conduct a deliverability test; provided, however, if as a result of such test the daily contract quantity is not restored to the daily contract quantity in effect prior to such downward adjustment, Seller shall not be permitted [780]*780for a period of ninety (90) days following the completion of such test to request Buyer to conduct a subsequent test. It is further provided that upon receipt of notice from Seller that the inability to deliver gas well gas has been remedied, Buyer may, in lieu of conducting such test, notify Seller that commencing with the first day of the month following receipt of said notice from Seller, the downward adjustment in the daily contract quantity as provided in this Section 4 shall no longer be effective.

The third provision of each contract about which there was a dispute was the force majeure clause:

If either Buyer or Seller is rendered unable, wholly or in part, by force maj-eure or any other cause of any kind not reasonably within such party’s control to perform or comply with any obligation or condition of this Agreement, upon giving notice and reasonably full particulars to the other party such obligation or condition shall be suspended during the continuance of the inability so caused and such party shall be relieved of liability and shall suffer no prejudice for failure to perform the same during such period; provided obligations to make payments then due for gas delivered hereunder shall not be suspended and the cause of suspension (other than strikes or lockouts) shall be remedied so far as possible with reasonable dispatch. Settlement of strikes and lockouts shall be wholly within the discretion of the party having the difficulty. The term “force majeure” shall include, without limitation by the following enumeration, acts of God and the public enemy, the elements, fire accidents, break-downs, shut-downs for purposes of necessary repairs, relocation or construction of facilities, breakage or accidents to wells, machinery or lines of pipe, the necessity of making repairs or alterations to machinery or lines of pipe, inability to obtain materials, supplies, permits, or labor to perform or comply with any obligation or condition of this Agreement, strikes and any other industrial, civil or public disturbance, any act or omission (including failure to take
gas) of a purchaser of substantial quantities of gas from Buyer which is excused by any event or occurrence of the character herein defined as constituting force majeure, and any laws, orders, rules, regulations, acts or restraints of any government or governmental body or authority, civil or military.

Further, Article V, section 8 provided:

Notwithstanding anything to the contrary contained herein, on any day when deliveries or takes are affected by force majeure and the volumes of gas well gas delivered are less than the applicable daily contract quantity, the daily contract quantity hereunder shall be deemed to be the actual volume delivered and purchased on each such day.

The case was submitted to the jury on a total of eight questions — two questions pertaining to each of the four contracts in question for each of the years the contract was in force. Questions 1, 3, 5 and 7 inquired whether “ANR has failed to comply with the ‘take-or-pay’ provisions of (the named contract) for the following years and that such failure, if any, was not excused by any provision of said contract?” Questions 2, 4, 6 and 8 inquired of the amount due and owing to ARCO as a result of ANR’s failure to comply with the take- or-pay provision of each respective contract for each respective period of time.

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768 S.W.2d 777, 105 Oil & Gas Rep. 108, 1989 Tex. App. LEXIS 177, 1989 WL 7329, Counsel Stack Legal Research, https://law.counselstack.com/opinion/atlantic-richfield-co-v-anr-pipeline-co-texapp-1989.