Atlantic Richfield Co. v. The Long Trusts
Texas Court of Appeals
860 S.W.2d 439 (Tex. App. 1993)
Atlantic Richfield Co. (ARCO) (defendant) operated gas wells under a joint operating agreement with The Long Trusts (Trusts) (plaintiff), which authorized ARCO to sell Trusts's unmarketed gas at "the best price obtainable in the area." ARCO sold that gas to its own wholly owned subsidiary, B & A Pipeline Company (B & A), which had separately locked in a ten-year contract to sell gas to Lone Star Gas at a price that -- even after a later settlement lowering it -- remained well above what B & A paid ARCO. Trusts sued ARCO for breach of the best-price clause and for an accounting of the sales to B & A. The trial court ruled for ARCO on the breach claim and for Trusts on the accounting claim, and both sides appealed.
Whether an oil and gas operator that markets a non-operator's gas under a joint operating agreement acts as the non-operator's agent, and whether a "best price obtainable" clause in that agreement requires comparing available prices to gas already committed to a long-term sales contract.