Forest Oil Corp. v. Eagle Rock Field Services, LP
349 S.W.3d 696
| Tex. App. | 2011Background
- Forest Oil and Eagle Rock are successors to a 2003 gas-purchase agreement that required Forest to sell gas and processing rights for NGLs; agreement terminated September 30, 2008.
- Forest sued in 2007 for breach of contract, waste, and related claims, alleging Eagle Rock failed to pay for liquids condensed in Eagle Rock's compression facilities and Arrington Plant.
- The contract granted Eagle Rock exclusive processing rights and reserved Forest's right to deliver gas at pressures sufficient to enter Eagle Rock's system, while restricting Forest from processing before delivery.
- Liquids recovered at the lean-oil processing at Arrington Plant were defined as NGLs; condensate recovered downstream of receipt points was owned by Eagle Rock; processing was disputed as to whether it included compression.
- The trial court concluded the term 'processing' was unambiguous and did not include compression; it granted Eagle Rock summary judgment; Forest appealed seeking reversal.
- On appeal, the Texas Court of Appeals held that 'processing' did not include compression, and liquids from compression before lean-oil processing were Condensate belonging to Eagle Rock; waste claim accordingly failed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does 'processing' include compression of gas under the contract? | Forest argues processing includes mechanical compression altering pressure/temperature. | Eagle Rock argues processing is limited to plant processing; compression is not processing. | Processing does not include compression; contract unambiguously assigns processing rights to Eagle Rock. |
| Are liquids condensed during compression NGLs payable to Forest? | Forest contends condensed liquids from compression are NGLs under processing. | Liquids condensed before lean-oil processing are Condensate, not NGLs, and belong to Eagle Rock. | Liquids condensed during compression before lean-oil processing are Condensate owned by Eagle Rock; not NGLs due Forest. |
| Does the contract allow Forest to recover NGLs from processing at Arrington Plant to the extent claimed? | Forest argues it is entitled to NGLs from processing as defined by Plant Products and NGLs. | Only liquids processed at the Plant yield NGLs; compression does not constitute processing. | Forest not entitled to NGLs for liquids arising from compression; waste claim fails. |
Key Cases Cited
- Dynegy Midstream Services, L.P. v. Apache Corp., 294 S.W.3d 164 (Tex. 2009) (compressor stations not 'plants'; pay for liquids at processing plants only)
- J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223 (Tex. 2003) (ambiguity is a question of law; contract interpreted as a whole)
- Heritage Res., Inc. v. NationsBank, 939 S.W.2d 118 (Tex. 1996) (contract terms given plain and ordinary meanings unless technical meaning evident)
- Valence Operating Co. v. Dorsett, 164 S.W.3d 656 (Tex. 2005) (determine ambiguity by contract language and circumstances)
- Seagull Energy E & P, Inc. v. Eland Energy, Inc., 207 S.W.3d 342 (Tex. 2006) (contract interpretation; primary concern is the parties' intent)