Questar Exploration and Production Company, now known as QEP Energy Company, a Texas corporation Wexpro Company, a Utah corporation v. Rocky Mountain Resources, LLC, 388 P.3d 523

Background

Walter Davis reserved a 4% overriding royalty interest (ORRI) in 1953 when he assigned two State of Wyoming leases (the 505 and 529 Leases) using the State Land Board’s standard assignment form, which stated the grants and reservations "extend to any renewal lease, substitute lease or new lease issued in lieu thereof with full effect."
The Pinedale Unit formation extended the 505 and 529 Leases until the unit contracted; the leases terminated in 1979 and reverted to the State.
The State combined the acreage and offered it at public drawing; Dr. Ribbe won the drawing and received a new 640-acre lease (the Ribbe Lease) in November 1979, later selling it to Mountain Fuel Supply (via subsidiaries). The Ribbe Lease had materially different terms.
Mountain Fuel Supply (and later QEP and Wexpro) developed the Ribbe Lease; decades later production became lucrative and large royalties were paid.
Rocky Mountain Resources (RMR), successor to Davis’s interests, sued QEP and Wexpro asserting Davis’s 4% ORRI extended to the Ribbe Lease under the assignment language. The district court granted summary judgment for RMR on liability, held the assignment language operated as an anti-washout extension, and a jury awarded >$30 million in past royalties.
The Wyoming Supreme Court reversed: it held the assignment phrase must be read according to its ordinary meaning and, on the undisputed facts, the Ribbe Lease was not a "renewal," "substitute," or "new lease issued in lieu of" the 505/529 Leases, so the 4% ORRI did not attach; the Court instructed the district court to enter summary judgment for QEP and Wexpro.

Issues

Issue	Plaintiff's Argument (RMR)	Defendant's Argument (QEP/Wexpro)	Held
Did the assignment language (extend ORRI to any "renewal, substitute or new lease issued in lieu thereof") apply to the Ribbe Lease?	The clause is an anti-washout/extension clause and, as a matter of law, applies because the Ribbe Lease covered the same lands and was acquired by an assignee shortly after termination.	The Ribbe Lease was a wholly new State lease issued after the original leases reverted to the State; it was not a substitute or a lease issued in lieu of the prior leases, so the ORRI ended at termination.	Held for defendants: Ribbe Lease did not fit ordinary meaning of "renewal, substitute, or new lease issued in lieu of," so ORRI did not attach.
Did the district court properly rely on this court's prior Hartman decision (Unit NPI Contract) to extend Davis’s ORRI to the Ribbe Lease?	Hartman established that the Ribbe Lease could be a "replacement" for similar contract purposes and supports extension.	Hartman interpreted different contract language (a Unit NPI Contract) and is not dispositive for the State assignment form; the court must independently analyze the assignment wording.	Held: Hartman’s interpretation of different contract language is not controlling; district court erred to rely on it without independent analysis.
Was the assignment language ambiguous such that factual issues precluded summary judgment?	The clause should be construed to effect fairness and to prevent operator washout; factual circumstances show economic continuity supporting extension.	The language is susceptible to its ordinary meaning and, on undisputed facts, does not cover a new public-drawing lease to a different lessee on different terms.	Held: Clause interpreted by ordinary meaning; undisputed facts show Ribbe Lease outside its scope — summary judgment for defendants appropriate.
Should summary judgment for QEP/Wexpro have been denied because of other defenses (statute of frauds, statute of limitations, bona fide purchaser) that required jury resolution?	RMR argued its claim was timely and not defeated by those defenses; jury could resolve notice and accrual issues.	Defendants argued multiple defenses, but the primary issue was whether the ORRI attached at all; if it did not, those defenses are immaterial.	Held: Because ORRI did not attach as a matter of law, the other defenses need not be reached; district court must enter summary judgment for defendants.

Key Cases Cited

Ultra Resources v. Hartman, 226 P.3d 889 (Wyo. 2010) (interpreting Unit NPI Contract and holding Ribbe Lease was subject to that contract’s new-lease provision)
Union Pacific R.R. Co. v. Caballo Coal Co., 246 P.3d 867 (Wyo. 2011) (standard for reviewing contract interpretation on summary judgment)
Leithead v. American Colloid Co., 721 P.2d 1059 (Wyo. 1986) (circumstances where appellate court directs entry of summary judgment)
Moncrief v. Williston Basin Interstate Pipeline Co., 880 F. Supp. 1495 (D. Wyo. 1995) (oil and gas agreements are governed by contract law)