Cotiga Development Company v. United Fuel Gas Company

Summary

The court held that the lease's royalty covenant unambiguously required royalties to be calculated at the rate United Fuel received for the gas, rather than at the wellhead price. It affirmed the findings that United Fuel breached its marketing covenant and that a specified volume of gas should have been marketed, but rejected interest as the proper damages measure and required royalty damages subject to a dollar-for-dollar credit when the gas was later marketed. The court also held that the tax covenant was ambiguous and that the parties' longstanding conduct controlled its interpretation.