- 16 - to be shared among all of the partnerships, each burdened by its own debt obligations to Elektra and to TexOil. Cayias errs in his projection that 50 percent of the oil in place would be recovered. This projection or assumption, based on Bursell's testimony, is not reasonable and is indefensible. Cayias seeks to justify the large technology license fees for which Cromwell became obligated by a projection based on the application of traditional steam flood technology rather than on any technology licensed by Cromwell from Elektra. Cayias' analysis simply supports respondent's position that the license of a portfolio of EOR technology was totally unnecessary and unjustified. The evidence establishes that the technology license fees for which Cromwell became obligated were not customary in the industry and were grossly overvalued. Petitioners have failed to distinguish this case from Krause v. Commissioner, 99 T.C. 132 (1992), with regard to the license fees for the EOR technology. Petitioners also argue that Cromwell had a greater potential for profit than Technology-1980 because Cromwell agreed to pay less for its TexOil tar sands acreage than did Technology-1980. As respondent's expert, Henry J. Gruy, explained, however, the consideration agreed to by Cromwell with regard to the tar sands acreage still exceeded fair market value because, absent any reserves, its value was zero.Page: Previous 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Next
Last modified: May 25, 2011