Marathon Oil Company v. United States
United States District Court for the District of Alaska
604 F. Supp. 1375 (D. Alaska 1985)
Marathon (plaintiff) transported gas from federal leases to an LNG plant, liquefied it, and sold the resulting LNG in Japan, but computed its 12.5 percent federal royalty based on the unliquefied gas price rather than the eventual Japan sale price; the Mineral Management Service (MMS) (defendant) issued an order recalculating the royalty value by starting with the Japan sale price and subtracting liquefaction and transportation costs plus a reasonable rate of return on the LNG plant. Marathon sued, arguing the applicable regulation required valuing the gas at the point of delivery to the LNG plant, and the government moved for summary judgment.
Whether a federal land lessee's gross proceeds, for purposes of computing the value of mineral production, are equal to the total consideration paid to the lessee for the minerals.