- 4 -
At a certain period prior to the years in issue, ARCO
discovered carbon dioxide gas under the Huerfano property and
transported the gas via pipeline from Colorado into west Texas.
ARCO sold the gas to oil producers in west Texas. The oil
producers injected the carbon dioxide gas into oil reservoirs via
injection wells to increase oil production from nearby producing
wells.
The Huerfano property gas lease was part of a group of gas
leases consolidated into the “Sheep Mountain Operating Unit
Area”. That group of leases on adjacent land determined the
share of royalties the landowners received for carbon dioxide gas
produced from the common reservoir beneath the adjacent lands.
The leases required ARCO to pay the Sheep Mountain Operating
Unit Area owners, including W.C. Houchin Corp., the owners’
royalties. In 1981, Exxon purchased a 50-percent interest in
carbon dioxide production from the Sheep Mountain Operating Unit
Area. Exxon, as a result of the purchase, was required to
reimburse ARCO for 50 percent of the royalties paid for the
carbon dioxide gas produced.
On July 14, 1995, ARCO filed a complaint in the U.S.
District Court for the District of Colorado against several
carbon dioxide gas lessees, including William Houchin.4 In the
4 We note that “William C. Houchin” is the named defendant
in the civil action brought by ARCO. W.C. Houchin Corp.,
(continued...)
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Next
Last modified: May 25, 2011