French v. Occidental Permian Ltd. (Opinion)
Annotate this CasePetitioners owned the royalty interests under two oil and gas leases. The leases were later pooled to form the Cogdell Canyon Reef Unit (CCRU). Since the CCRU was formed, a method of enhanced oil recovery began to be used by injecting carbon dixoide into the reservoir to sweep the oil to the production wells. With this method, the carbon dioxide returns to the surface entrained in casinghead gas, which is gas produced with the oil. At issue in this case was whether the royalty due on the gasinghead gas under the parties’ agreements must be determined as if the injected carbon dioxide were not present and whether the royalty owners were required to share with the working interest the expense of removing the carbon dioxide from the gas. The Supreme Court concluded that, under the parties’ agreements the royalty owners must share in the cost of carbon dioxide removal and were not entitled to a royalty based on the carbon dioxide’s value when it is produced with the casinghead gas.
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