Fina Oil & Chemical Co. v. Norton
United States Court of Appeals for the District of Columbia Circuit
332 F.3d 672 (D.C. Cir. 2003)
Fina Oil (plaintiff) leased federal land and sold gas to Fina Natural Gas Company (FNGC), a reseller Fina controlled but which was not a "marketing affiliate" because it also bought gas from unrelated parties. Fina paid royalties based on its own sale price to FNGC, but the Department of the Interior (DOI) (defendant) ruled that Fina should instead pay royalties based on FNGC's higher resale price, reasoning that the regulatory term "lessee" effectively included Fina's affiliates like FNGC. Fina challenged this interpretation; the district court sided with the DOI, and Fina appealed.
Whether gas sold by a lessee of federal land to a non-marketing affiliate is valued for royalty purposes based on the gross proceeds the lessee received on its own initial sale, rather than the affiliate's subsequent resale price.