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Petitioners also contest respondent’s argument that McIntyre
disregarded evidence of comparable minimum royalty obligations in
use at the time ERL entered into the lease with JAD. Petitioners
restrict their attack on this argument to a challenge of
respondent’s expert’s ability to appreciate the nature and
quality of the transaction. Respondent’s argument, however, is
convincing. JAD leased a portion of the same property in October
1979 to an independent company. The terms of that agreement
required the lessee to pay an annual minimum royalty of just
under $25,000. Furthermore, ERL’s manager of mining operations,
a person possessing a thorough knowledge of the coal mining
industry, testified that the largest minimum royalty with which
he was familiar, excluding those in which McIntyre was a party,
involved a lease which required an annual minimum royalty of
$200,000 on an 80,000-acre tract of land. This witness did,
however, attempt to justify the disparity by noting that while
ERL’s minimum royalty obligations were considerably higher than
the minimum royalty obligations with which he was familiar, they
were justified because ERL could defer each payment for up to 30
years. We reject this attempted justification and, based upon
the record, conclude that ERL’s minimum royalty obligations were
not reasonably comparable to those provided under similar leases
in the geographic region.
Respondent next argues that petitioners have failed to
establish that ERL had an actual and bona fide objective to
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