Bowers Oil & Gas, Inc. v. DCP Douglas, LLC
2012 WY 103
| Wyo. | 2012Background
- BOG entered a Gas Purchase Contract with Kinder Morgan in 2004 to sell coal bed methane gas.
- MEG Wyoming Gas Service, LLC acquired Kinder Morgan’s assets in 2006 and later terminated the contract under Paragraph 4 claiming uneconomical conditions.
- ACC’s surface mining expansion triggered provisions in a Surface Use Agreement with BOG, including shut-in and removal requirements for wells near the mine.
- MEG removed certain feeder pipelines rather than relocating them, creating an economic dispute about continued gas purchases from BOG.
- ACC’s expansion and related creek diversion affected operations; BOG shut in wells in 2006 for six months to accommodate mining activity.
- DCP Midstream acquired MEG in 2007, inherited the stranded gas issue, and ultimately terminated the contract in 2008 for economic reasons.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach of contract due to decommissioning | BOG asserts contract required continued purchase if feasible; decommissioning caused uneconomical conditions. | MEG/DCP could terminate unilaterally under Paragraph 4 based on uneconomical conditions; no guaranteed purchase | No breach; termination upheld as uneconomical under contract terms. |
| Covenant of good faith and fair dealing | DCP/MEG acted dishonestly to terminate after obtaining a mine-side deal with ACC. | DCP/MEG acted in good faith, pursuing alternatives and considering mine impacts; no breach. | No breach of implied covenant; district court findings affirmed. |
Key Cases Cited
- Piroschak v. Whelan, 106 P.3d 887 (Wyoming 2005) (clearly erroneous standard for factual findings; deference to trial court)
- Hofstad v. Christie, 240 P.3d 816 (Wyoming 2010) (standard for reviewing factual determinations on appeal)
- Claman v. Popp, 279 P.3d 1003 (Wyoming 2012) (de novo review for conclusions of law)
- Union Pacific Resources Co. v. Texaco, 882 P.2d 212 (Wyoming 1994) (contract interpretation; plain meaning governs when unambiguous)
- City of Gillette v. Hladky Constr., Inc., 196 P.3d 184 (Wyoming 2008) (implied covenant contextualized by contract language and conduct)
- Ultra Res., Inc. v. Hortman, 226 P.3d 889 (Wyoming 2010) (recognition of implied covenant in commercial contracts)