Conocophillips Company and Burlington Resources Oil & Gas Company, L.p., Plaintiffs-Appellees v. Patrick H. Lyons…

Summary

The New Mexico Supreme Court affirmed the district court's summary‑judgment rulings, holding that the statutory oil‑and‑gas leases’ net‑proceeds royalty language is unambiguous and permits deduction of reasonable post‑production costs, that the free‑use clause allows Lessees to use plant and field fuel without royalty, that royalties on drip condensate are owed only to the extent Lessees receive proceeds, that the 1947 lease’s maximum‑price provision gives the Commissioner authority to base royalties on the maximum market price but still allows post‑production deductions, and that deductions for affiliate‑provided post‑production services must be reasonable. The Court also affirmed dismissal of the Commissioner’s implied‑covenant‑to‑market claim.