Houston Pipe Line Co. v. BHP Petroleum (Americas), Inc.

785 S.W.2d 398, 115 Oil & Gas Rep. 352, 1988 Tex. App. LEXIS 1639, 1988 WL 185879
CourtCourt of Appeals of Texas
DecidedJuly 14, 1988
DocketNo. C14-87-00138-CV
StatusPublished
Cited by2 cases

This text of 785 S.W.2d 398 (Houston Pipe Line Co. v. BHP Petroleum (Americas), Inc.) 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
Houston Pipe Line Co. v. BHP Petroleum (Americas), Inc., 785 S.W.2d 398, 115 Oil & Gas Rep. 352, 1988 Tex. App. LEXIS 1639, 1988 WL 185879 (Tex. Ct. App. 1988).

Opinion

OPINION

JUNELL, Justice.

This is an appeal from a summary declaratory judgment concerning the refund due under a gas sales contract between the seller, BHP Petroleum (Americas), Inc. (ap-pellee or BHP), and the purchaser, Houston Pipe Line Company (appellant or Houston Pipe). In two points of error, Houston Pipe contests both the summary judgment and the award of attorney’s fees to BHP. We affirm the judgment of the trial court.

By way of background, the Natural Gas Policy Act of 1978 (NGPA) established maximum lawful prices or ceiling prices per million Btu’s (MMBtu’s) for various categories of natural gas. 15 U.S.C. §§ 3301-3432 (Supp. V 1981). A Btu (British thermal unit) is the standard of measurement of the energy content of natural gas. Following the passage of the NGPA, the Federal Energy Regulatory Commission (FERC) promulgated a new rule for measuring Btu’s. This rule required that [399]*399the content be measured under the varying, relatively “dry” conditions at which gas is delivered for sale rather than the uniform, water-vapor saturated “wet” conditions under which PERC had previously determined the energy content. Interstate Natural Gas Ass’n of America v. Federal Energy Regulatory Commission, 716 F.2d 1, 4 (D.C.Cir.1983), cert. denied, 465 U.S. 1108, 104 S.Ct. 1615, 80 L.Ed.2d 144 (1984) (see for history and discussion of Btu measurement rules). However, in 1983 the D.C. Circuit Court of Appeals vacated the “dry” rule, finding it to be inconsistent with the NGPA's language, structure and legislative history. Id. at 14-15. PERC then adopted the “wet” rule and applied it retroactively to the passage of the NGPA. 49 Fed.Reg. 3,072 (1984); 49 Fed.Reg. 37,-735, 37,737 (1984).

Use of the wet rule resulted in a slightly lower Btu content than that obtained by use of the dry rule. The lower Btu content, in turn, lowered the maximum amount of revenues that could be collected under the NGPA. Because the wet rule was applied retroactively, some producers found they had overcharged their purchasers and were required to refund those overcharges. FERC addressed the issue of refunds in its Order No. 399.

Specifically, any first seller that collected revenues in excess of the product of (a) the applicable maximum lawful price established by the NGPA, and (b) the quantity of MMBtu’s (million Btu’s) determined on the basis of the wet rule (i.e., under standard test conditions), must refund any such excess revenues. To the extent that revenues collected for gas sold in a first sale under the NGPA are less than or equal to the level of revenues thus calculated, and are contractually authorized, no excess revenues would have been collected, and no refunds are due.

49 Fed.Reg. at 37,737.

Houston Pipe and BHP executed a gas purchase contract on October 14, 1976. This dispute involves the sale of gas from January 1, 1981, through June 30, 1983. During this period, Houston Pipe paid BHP based on the dry rule and a price per MMBtu pursuant to annual redetermination agreements. Each agreement (in letter form) set the contract price for that year at the NGPA ceiling price in effect for the first month of that year. Thus, the price per MMBtu was set at $2,667 for 1981, $3,003 for 1982 and $3,299 for 1983. It is important to note, however, that according to the NGPA schedule, the ceiling price actually escalated each month. Therefore, while the ceiling price per MMBtu’s delivered in January 1981 was $2,667, by December 1981 the ceiling price was $2,971. Regardless, the price paid by Houston Pipe remained at $2,667 throughout the year per the contract.

Upon the adoption of the wet rule and the issuance of the refund regulations, Houston Pipe determined that it had been overcharged during the thirty-month period and invoiced BHP for a refund. BHP refunded $97,884.71 but later decided the amount owed was only $15,901.43. When Houston Pipe disagreed and would not return the difference of $81,983.28, BHP filed suit. BHP then filed a motion for summary judgment, which the trial court granted. BHP was awarded the $81,983.28 plus interest and, following a hearing, was also awarded attorney’s fees of $40,000 (inclusive of appeals).

As indicated, this dispute has to do with the amount of the refund due under FERC Order No. 399. BHP calculated the refund by first converting the dry MMBtu’s to wet MMBtu’s (using a conversion factor of .9826 as referenced in FERC Order No. 93-A, 46 Fed.Reg. 24,537, 24,545 (1981)) and then applying the formula set out in FERC Order No. 399 (the applicable maximum lawful price established by the NGPA times the quantity of MMBtu’s determined on the basis of the wet rule). According to BHP’s calculations, a refund was due for January and February of 1981, January and February of 1982 and January, February and March of 1983 because in those months the revenues received under the contract exceeded those allowed under the NGPA. Refunds were not owed for. any other months because of the fact, noted earlier, that the maximum lawful price or [400]*400ceiling price escalated monthly in contrast to the fixed contract price, which was readjusted each January 1. Shortly into each contract year, the difference between the fixed contract price (the price factor in calculating contract revenues) and the escalating maximum lawful price (the price factor in the refund formula) became significant enough to offset the lower Btu content caused by the change m the method of measurement. At that point the maximum revenues exceeded the contract revenues, and no refunds were due until the contract price was adjusted to the maximum lawful price the following January. The following data from January and March of 1982 may help to illustrate this point:

[[Image here]]

According to Houston Pipe’s calculations, however, a refund was owed for every month during the thirty-month period instead of for only seven months. Houston Pipe therefore appeals the judgment with two points of error.

In point of error one, Houston Pipe argues that the trial court erred in granting appellee’s motion for summary judgment. We consider this argument keeping in mind the following standards. To be entitled to summary judgment, the movant must conclusively prove all essential elements of his claim. MMP, Ltd. v. Jones, 710 S.W.2d 59, 60 (Tex.1986). The movant has the burden of showing there is no genuine issue of material fact and that he is entitled to summary judgment as a matter of law. In deciding whether there is a disputed material fact issue precluding summary judgment, evidence favorable to the non-movant will be taken as true. Every reasonable inference must be indulged in favor of the non-movant and any doubts resolved in his favor. Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548-49 (Tex.1985).

Houston Pipe attacks the summary judgment on nine grounds. Six of those concern the effect of two sections of the contract and a paragraph in the price redeter-mination letters. These are as follows:

Free access — add to your briefcase to read the full text and ask questions with AI

Related

John Cook, Jr. v. Permanent General Assurance Corp.
Court of Appeals of Tennessee, 2010
Intratex Gas Co. v. Puckett
886 S.W.2d 274 (Court of Appeals of Texas, 1994)

Cite This Page — Counsel Stack

Bluebook (online)
785 S.W.2d 398, 115 Oil & Gas Rep. 352, 1988 Tex. App. LEXIS 1639, 1988 WL 185879, Counsel Stack Legal Research, https://law.counselstack.com/opinion/houston-pipe-line-co-v-bhp-petroleum-americas-inc-texapp-1988.