Garman v. Conoco, Inc.
Colorado Supreme Court
886 P.2d 652 (Colo. 1994)
The Garmans (plaintiffs) assigned oil and gas leases to Conoco (defendant) subject to an overriding royalty interest; the lease didn't specify who bore the costs of processing, transporting, and compressing raw gas into a marketable product. Conoco deducted these post-production costs from the Garmans' royalty payments for years, prompting the Garmans to sue for a declaratory judgment and accounting; the federal district court certified the underlying cost-allocation question to the Colorado Supreme Court.
Whether the owner of an overriding royalty interest in gas production must bear a proportionate share of post-production costs required to transform raw gas into a marketable product when the lease is silent on the issue.