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complaint, ARCO requested a declaratory judgment declaring as
proper the deductions that decreased the royalties paid to the
gas lessees. The disputed deductions were related to the cost of
transporting the carbon dioxide gas from Colorado to west Texas.
The defendant gas lessees, including William Houchin,
counterclaimed against both ARCO and Exxon for, inter alia,
alleged unpaid royalties for past production as a result of
improper transportation deductions (transportation portion) and
allegedly undervaluing the carbon dioxide gas sold (valuation
portion) for purposes of computing the royalties paid to the
lessees.
The U.S. District Court for the District of Colorado
dismissed Exxon from the case. However, Exxon was obligated to
pay 50 percent of any royalties determined to be due in the case,
and therefore Exxon remained involved in the resolution of the
lawsuit.
In November of 1997, the court granted defendants’ motion
for summary judgment on the transportation portion of the case.
The parties engaged the services of an arbitrator and commenced
4(...continued)
however, received the rights to “all oil, gas and minerals”
related to the Huerfano property prior to the filing of ARCO’s
civil action. The parties negotiated and settled the case with
William Houchin. W.C. Houchin Corp., however, is the owner of
the royalty income from the gas lease and reported the settlement
agreement on its 1999 U.S. Income Tax Return for an S
Corporation.
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Last modified: May 25, 2011