Opinion
No. 99-CA-0502.
January 5, 2000.
APPEAL FROM CIVIL DISTRICT COURT, PARISH OF ORLEANS, NO. 91-13779, STATE OF LOUISIANA, DIVISION "J-13, HONORABLE LOUIS A. DIROSA, JUDGE.
DAVID N. SCHELL, JR., JAMES K. IRVIN, MILLING BENSON WOODWARD, L.L.P., New Orleans, Louisiana 70112, and J. BRYAN WHITWORTH, CLYDE LEA, PHILLIPS PETROLEUM COMPANY, Bartlesville, Oklahoma 74004 and DAVID M. WHITNEY, PHILLIPS PETROLEUM COMPANY, Houston, Texas 77251-1967 and MICHAEL V. POWELL, DONALD ENSENAT, LOCKE LIDDELL SAPP, L.L.P., New Orleans, Louisiana 70130, Attorneys for Phillips Petroleum Company.
RICHARD A. GOINS, THE GOINS LAW FIRM, New Orleans, Louisiana 70170 and KENNETH M. CARTER, SIDNEY H. CATES, IV, CARTER CATES New Orleans, Louisiana 70163 and MACK E. BARHAM, BARHAM ARCENEAUX, New Orleans, Louisiana 70130 and DENNIS N. RYAN, ANDREWS KURTH, L.L.P., Dallas, Texas 75201, Attorneys for Box Energy Corporation.
(Court composed of Judge William H. Byrnes III, Judge Joan Bernard Armstrong, and Judge Dennis R. Bagneris Sr.).
Phillips Petroleum Company ("Phillips") and Box Energy Corporation ("Box") appeal a judgment giving Phillips an award for net profits and overriding royalty interests reserved in the Farmout agreement sub-lease of a federal oil and gas lease.
Phillips notes that this is the third case in which it sued Remington Oil and Gas Corporation [or its predecessors OKC Corp., OKC Ltd. Partnership, or Box (collectively "Box")]. Phillips filed suit to obtain an account for the net profits and overriding royalty interests that Phillips' predecessor, Aminoil, reserved in a Farmout agreement as it sub-leased its interest in a federal oil and gas lease that covered South Pass Block 89 ("Block 89") of the Outer Continental Shelf ("OCS") of Louisiana.
Remington and its predecessors are all referred to as "Box." During the trial, the parties referred to OKC; however, the judgment refers to Box. Box's corporate name recently was changed to Remington.
The Farmout agreement required Box to maintain a monthly account of income and expenses attributable to Block 89. Phillips is entitled to receive 33 percent of the net profits from Block 89 in profitable months. In unprofitable months, Phillips is entitled to receive a smaller overriding royalty.
In March 1989, Texas Eastern Transmission Company ("TETCO") filed suit against Box to terminate its purchase contact for Block 89 gas because the contact prices for gas greatly exceeded spot market prices. In 1990 Box received a settlement of $69.6 million. Phillips asserts that Box agreed to decrease the price for Block 89 in the future so that the gas sales proceeds would be reduced and would be paid into the net profits account after 1990 by a present value of more than $450 million. Phillips avers that Box and TETCO agreed to reduce TETCO's future price for Block 89 gas by approximately 50 percent.
After a bench trial, the trial court entered its judgment on August 18, 1998. The trial court dismissed Phillips' claim to cancel the Farmout agreement, and denied Phillips' claims for double damages and attorney's fees. The trial court also dismissed Box's counterclaims against Phillips for damages. The trial court dismissed Phillips' claim to share profits, post and future, from Box's purchase of the Marathon Pipeline. The trial court found in Phillips' favor and held that the net profits account should be made cumulative on a monthly basis. The trial court awarded Phillips $1,581,000 through January 1996 with an accounting ordered for net profits distribution subsequent to January 1996. The trial court also awarded Phillips $9,276,432 with interest and costs.
In its reasons for judgment, the trial court noted that $41,229,051 was the amount that should be allocated to the net profits account for the TETCO settlement of the proceeds from past production underpaid by TETCO. The trial court deducted $5,779,584 for the amount previously paid by Box to the net profit account. The trial court also deducted $5,908,244 for the royalty due to the federal Mineral Management Service. The trial court deducted attorney fees from the net profits account in the amount of $1,431,824 for a total amount of $28,110,399. Phillips' 33% portion was $9,276,432 plus interest and costs. Both parties appealed.
The following three issues were litigated relating to the Farmout agreement's net profits interest for Block 89: (1); whether the entire proceeds of the TETCO settlement should be credited to the net profits account; (2) whether Box charged an excessive transportation cost to the net profits account; and (3) whether Box correctly accounted for a reverting overriding royalty included in the Farmout agreement. Also at issue is whether the trial court erred in not awarding attorney's fees and double damages to Phillips, and in not dissolving the Farmout agreement.
PROCEEDS OF TETCO SETTLEMENT
Phillips asserts that the trial court erred in finding that only the portion of the TETCO settlement related to actual production of gas was required to be credited to the net profits account under the Farmout agreement.
Phillips contends that the trial court erred in concluding that only $41,229,051 of the $69.6 TETCO settlement proceeds must be credited to the net profits account as additional payment for past production purchased by TETCO. Phillips also argues that the trial court erred by permitting Box to take, in advance, $5,908,244 from the $41,229,051 owed to the net profits account for royalty that the trial court believed Box would owe to the federal government.
Phillips avers that Box charged the expenses of the TETCO litigation to the net profits account, and Box stated that any settlement would be reflected on the net profits statement in the month payment was received. However, Box credited $5,779,584 of the $69.6 million TETCO settlement to the net profits account. Phillips claims that the Farmout agreement required Box to credit the net profits account with: (1) all proceeds from the sale of gas; (2) all proceeds from judgments and claims collected by Box because of its ownership of the Block 89 lease; and (3) all other monies and things of value received by Box because of its ownership of the Block 89 lease.
Paragraph IV of the Farmout agreement states in pertinent part:
The following shall apply to the calculation of "net profits" as used herein:
(a) Net profits shall not include any right, title, or interest in and to any of the personal property, fixtures, or equipment now or hereafter placed upon the subject lease, and the net profits interest excepted and reserved by Aminoil [Phillips] is exclusively an interest in net profits, as hereafter defined, and Aminoil [Phillips] shall look exclusively to the oil, gas, condensate, and other hydrocarbons, and any minerals produced from the subject lease for the satisfaction and realization of the net profits interest.
(b) Subject to the provisions of Article II hereof, OKC [Box] shall have exclusive charge and control of the marketing of all oil, gas, condensate, and other hydrocarbons, and other minerals allocable to the net profits interest, and shall collect and receive the proceeds of the sale of all such production.
(c) OKC [Box] shall maintain a net profits account in accordance with the terms of this agreement and good accounting practices; the books of account and records of the net profits account shall at all reasonable times be open for examination, inspection, copying, and audit by Aminoil [Phillips] and its accredited representatives at Aminoil [Phillips]'s expense.
(d) Into the net profits account shall be credited the following:
(1) an amount equal to OKC [Box]'s share of the sale proceeds of all oil, gas, condensate, other hydrocarbons, and other minerals accruing after the effective date hereof and allocable to the surface lease, but excluding therefrom those proceeds attributable to all royalties outstanding and burdening the subject lease prior to the effective date of this agreement and the overriding royalty provided for Article IV; . . .
(2) an amount equal to the proceeds of the sale and/or rental of any of the interest acquired by OKC [Box] from Aminoil [Phillips] and any personal property or equipment located on the subject lease or hereinafter charged to the net profits account; . . .
(3) an amount equal to the proceeds of all insurance collected by OKC [Box] . . . on account of its ownership interest in the subject lease as a consequence of a loss of or damage to [lease properties or personal property located on the lease or charged to the net profits account];
(4) an amount equal to the proceeds of all judgments and claims collected by OKC [Box] on account of its ownership of the subject lease and involving one or more of the following: the subject lease or any part thereof or interest therein, or the personal property or equipment located thereon, or any other property if its cost has been charged to the net profits account;
(5) an amount equal to all monies and things of value received by or inuring to the benefit of OKC [Box] by virtue of its ownership interest in the subject lease . . . ; and
(6) an amount equal to any contributions of money (whether as dry hole or bottom hole contributions or otherwise) or value which OKC [Box] receives on account of the development of the subject lease . . .
Phillips argues that the entire TETCO settlement was within subparagraph IV(d)(1) of the Farmout agreement, which pertains to gas sales proceeds. Phillips asserts that the trial court construed the general statement in Paragraph IV(a) to override the more specific provisions of paragraph IV(d). The trial court found that Box must credit only the proceeds from actual oil and gas production to the net profits account.
Paragraph IV(a) provides that "Aminoil shall look exclusively to the oil, gas, condensate, and other hydrocarbons, and any minerals produced from the subject lease for the satisfaction and realization of the net profits interest." Box asserts that Paragraph IV(a) provides that the net profit account should include proceeds of any oil, gas, etc. actually produced.
However, Paragraph IV(d)(4) specifically provides that the net profits account should include "an amount equal to all the proceeds of all judgments and claims collected by OKC", i.e., Box. Paragraph IV(d)(5) also includes in the net profits account "an amount equal to all monies and things of value received by or inuring to the benefit of OKC [Box]." The Farmout agreement does not state that the proceeds of only actually produced minerals should be included in the net profits account. Even if the agreement were interpreted to mean "actually produced" minerals, etc. under Paragraph IV(a), the Farmout agreement also includes Paragraph IV(d) which designates that " all the proceeds of all judgments and claims collected by OKC", i.e., Box, as well as all monies and things of value should be included in the net profit account. In addition to all oil, gas, condensate, and other hydrocarbons, and any minerals produced, the Farmout agreement sets out other assets that also are to be allocated to the net profits account. The proceeds from the TETCO $69.6 million settlement clearly fall under "an amount equal to all the proceeds of all judgments and claims collected by OKC", i.e., Box, and must be included in the net profits account. Therefore, Box must credit the full TETCO settlement to the net profits account for Block 89. Box credited Phillips with $5,779,584 rather than $69.6 million. The trial court was clearly wrong in allocating only part of the settlement to that account. Box must credit the remainder of the $69.6 million to the net profits account, and Phillips is entitled to 33 percent of that amount.
Federal Royalty
Under paragraph IV(e)(5) of the Farmout agreement, as amended in 1989, Box is prohibited from charging costs to the net profits account before they are incurred. The charging costs are defined to mean those that have actually been paid, or are about to be paid, pursuant to an existing obligation to pay.
Box had not paid the federal royalty. TETCO indemnified Box in the TETCO settlement agreement for the federal royalty due as a result of the settlement. Further, in Phillips Oil Co. v. OKC Corp., 812 F.2d 265, 270 n. 9 (5 Cir. 1987), certiorari denied, 484 U.S. 851, 108 S.Ct. 152, 98 L.Ed.2d 107 (1987), Box is not allowed to take out imputed costs or interest prior to the calculation of the net profits that must be shared with Phillips. Box should not deduct the imputed interest on Box's investment in Block 89. If Box pays the federal royalty attributable to Block 89, such payments may be deducted from the net profits account but only when the cost is charged by the federal government when the amount is due.
The trial court erroneously deducted $5,908,244 for the federal royalty due as a result of the settlement although Box had not paid that royalty. On remand, Box should be given credit if it shows that it has paid the federal royalty without having been reimbursed by TETCO.
TRANSPORTATION COST
Phillips contends that the trial court erred in dismissing Phillips' claim to share profits from Box's purchase of the pipeline to transport the oil. Phillips argues that Box deducted from the net profits account $2.75 per barrel as a transportation cost for Block 89 oil. Phillips claims that this "transportation cost" was not a cost but was the product of self-dealing between Box and its affiliate, CKB Petroleum, Inc. ("CKB"). Phillips asserts that it was undisputed at trial that the real cost of transporting Block 89 oil was 58 cents per barrel. Phillips maintains that the difference between $2.75 and 58 cents resulted in a cost overcharge of $22,193,540, to the net profits account through January 31, 1996, for which 33 percent ($7,323,868) belongs to Phillips. Phillips complains that it is a continuing breach of the Farmout agreement. Phillips alleges that Box paid approximately $22 million to CKB, which paid it back to Cloyce Box and his sons in annual salaries and dividends.
Phillips contends that Box did not fulfill its obligation to act as a prudent operator under the sublease for the mutual benefit of Box and Phillips when Box overcharged for the transportation cost. Phillips contends that the Block 89 lease was a cooperative venture that must be operated for the mutual benefit of OKC [the predecessor of Box] and Phillips. Frey v. Amoco Production Co., 603 So.2d 166, 173 (La. 1992). Therefore, all economic benefits accruing to Box from the Block 89 lease must be shared by Box with Phillips. Box was obligated by law to operate the Block 89 sublease "as a good administrator, according to the use for which it was intended by the lease" under La. CC. art. 2710. and as a "reasonably prudent operator for the mutual benefit of itself and [Phillips]" pursuant to La.R.S. 31:122 under the Louisiana Mineral Code. Box asserts that it has no obligation because a lessor/lessee relationship does not exist.
Box argues that Phillips did not lease its interest in Block 89 to Box Energy. Rather, Phillips assigned all of its rights and interest in Block 89 to Box Energy while reserving a net profits interest allowing it to share in the profits from the actual production of oil and gas from Block 89. Box points out that in Trial Exhibit 38, the United States Department of the Interior approved the assignment on October 4, 1977. The assignment was signed by Aminoil (later Phillips) and OKC Corporation (later Box) on May 26, 1977. Therefore, Box asserts that it did not have any lease obligation under the agreement because it was an assignment rather than a sublease. Box maintains that federal law applies, and under 43 C.F.R. § 3106.1, a lease may be assigned as to all or part of the leased acreage.
Federal mineral leasing statutes do not apply to private contracts, even those pertaining to federally-owned lands. Wallis v. Pan Am. Petroleum Corp., 384 U.S. 63, 86 S.Ct. 1301, 16 L.Ed.2d 369 (1966). Louisiana mineral law applies to determine the rights of private parties under private contracts pertaining to federal offshore leases. Tidelands Royalty "B" Corp. v. Gulf Oil Corp., 804 F.2d 1344 (5 Cir. 1986), Phillips Oil Co. v. OKC Corp., 812 F.2d 265 (5 Cir.) certiorari denied, 484 U.S. 851, 108 S.Ct. 152, 98 L.Ed.2d 107 (1987).
Under La.R.S. 31:127, Comment (West 1989), a transfer is considered a sublease if the lessee assigned its rights under the lease but retains some interest in effect for the entire lease such as an overriding royalty or a perpetual or unlimited net profits interest. See Robinson v. North American Royalties, Inc., 463 So.2d 1384, 1386 (La.App. 3 Cir.), amended 470 So.2d 112 (La. 1985); Willis v. International Oil Gas Corp., 541 So.2d 332, 334 (La.App. 2 Cir. 1989).
La.R.S. 31:122 provides:
§ 122. Lessee's obligation to act as reasonably prudent operator
A mineral lessee is not under a fiduciary obligation to his lessor, but he is bound to perform the contract in good faith and to develop and operate the property leased as a reasonably prudent operator for the mutual benefit of himself and his lessor. Parties may stipulate what shall constitute reasonably prudent conduct on the part of the lessee. [Emphasis added.]
In the present case Phillip's predecessor, Aminoil, did not assign all of its rights in Block 89 to Box. Aminoil [Phillips]'s assignment dated May 9, 1977 was subject to the terms of the Farmout agreement that included the reservation of the overriding royalty interest and net profits interest. Therefore, the assignment is a sublease under Louisiana law.
Further, paragraph III of the assignment dated May 26, 1977 states: "Assignee [OKC Corp., the predecessor of Box] agrees to assume its proportionate share of all obligations imposed under the terms of the subject lease, including the payment of its proportionate share of rentals and royalties." The document entitled "ACCEPTANCE OF ASSIGNEE" dated July 11, 1977 states: "OKC CORP. [Box], Assignee in the above and foregoing instrument of Assignment, hereby accepts such Assignment and agrees to fulfill all of the obligations, conditions and stipulations to said described lease, as assigned." The Assignee, Box's predecessor, OKC, has agreed to fulfill all obligations of the lease. In the assignment dated April 30, 1981, states: "Assignee [OKC, a predecessor of Box] binds and obligates itself to perform all obligations of Lessee under said lease to the extent of the interest hereby assigned." Under these documents, Box had the same obligations as an assignee or as the lessee, including the obligation to act as a prudent operator.
Phillips provided expert testimony that the transportation cost was 58 cents per barrel for Block 89 oil. Ronald Bannister testified that the 58 cent cost included all operating costs for the pipeline, the purchase price for the pipeline plus the cost of enhancements to the pipeline, and premiums paid for insurance covering the pipeline. Box's experts did not refute the 58 cent cost and did not testify that $2.75 was a reasonable charge in relation to the actual cost of the pipeline service.
Box asserts that Bannister was not a proper expert because at the time that he testified, he no longer was a certified public accountant. Box maintains that Louisiana prohibits unlicensed accountants from testifying as experts. La.R.S. 37:77(B) provides in pertinent part:
No person shall engage in the practice of public accounting in the state of Louisiana unless he has in his personal possession a current certified public account license . . .
La.R.S. 37:72(A)(2) defines the practice of public accounting as:
(2) Signing or affixing one's own or firm name, or other name used in one's profession of business, to any opinion or certificate attesting in any way to the reliability of any representation or estimate in regard to any person or organization, embracing financial information or facts respecting compliance with conditions established by law or contract . . . together with any wording accompanying or contained in such opinion or certificate which indicates (a) that he is an accountant or auditor or that the firm is composed of, or employs, accountants or auditors, or (b) that he has expert knowledge in accounting or auditing or that the firm is composed of or employs persons having expertise in accounting or auditing; . . .
La.R.S. 37:72(1)(B)(C) provide in pertinent part:
B. Public accounting shall not be construed, however, to included holding one's self out to the public as competent to perform, offering to perform or actually performing bookkeeping services; provided that such services do not include any function, service, activity, conduct, practice or representation defined or included in Subsection A of this Section. Nor shall public accounting include the preparation of tax returns, provided the preparer does not indicate, in connection with his signature or otherwise, that he is a public account or certified public accountant. . . .
C. Nothing in this Chapter shall be construed to prevent the employment of uncertified or unlicensed persons by a licensed certified public accountant or by a firm of licensed certified public accountants, provided that such uncertified or unlicensed employees work under the control and supervision of licensed certified public accountants and such employees are not held out to the public, and do not hold themselves out to the public, as engaged in the practice of public accounting.
These statutes do not prohibit unlicensed accountants from being hired and working for a firm of licensed certified public accountants or testifying as expert witnesses. The statute provides that a person cannot practice as a certified public accountant or a public accountant without having a current certified public account licence.
Bannister did not practice as a certified public accountant, and he acknowledged that he did not have a current license although he remained certified. Bannister did not "hold himself out to the public" as a C.P.A. Bannister was hired by Price Waterhouse as an advisor to the Waterhouse C.P.A.'s preparation of the report in the present case. Bannister did not sign his name or attest to the report but he assisted in its preparation. He is not prevented from testifying as an expert having knowledge of the preparation of the report. Bannister is not prevented from testifying as an expert about his knowledge about the oil and gas industry.
Bannister worked as a certified public accountant for Price Waterhouse for 42 years before he retired as a partner in 1989. He has extensive experience with the petroleum business and with net profits agreements. He is certified in several states and had a certificate still in effect in Louisiana at the time of trial. In court Bannister has previously qualified as an expert witness in oil and gas accounting. He testified before concerning the prior litigation involving Phillips and Box and is familiar with the Farmout agreement. The Farmout agreement in the present case is dated June 14, 1977. Bannister was a practicing certified and licensed public accountant at the time the Farmout agreement was entered, and he is familiar with the accounting practices at that time and during the years in question. The trial court did not err in recognizing Bannister as an expert in the oil and gas industry, or as an expert concerning the preparation of the Price Waterhouse report with respect to the Farmout agreement.
Box further contends that Phillips had knowledge, tantamount to waiver or ratification of the excessive transportation costs from the net profits account for Block 89 under paragraph IV(f) of the Farmout agreement. Paragraph IV(f) provides in pertinent part:
(f) * * *
. . . If, at the expiration of one year from the rendition of a particular statement, Aminoil [Phillips] has raised no objection to the items therein reflected nor as to the debits or credits upon which such items are based, such statements shall be conclusively deemed to be correct for all purposes, and OKC [Box] shall no longer be required to maintain any records in connection therewith.
Before the end of 1984, Marathon Pipe Line Co. ("Marathon") owned and operated the South-Pass System that carried crude oil produced from Block 89 offshore to a receiving station in Plaquemines Parish. Box paid Marathon to transport Block 89 oil although Box complained about the price. Box negotiated with Marathon to purchase an undivided interest in Segments I and III to carry Box's share of Block 89 oil. Phillips' subsidiary, Largo, owned an interest in parts of South-Pass, but no interest in Segment I, which extends only to Block 89. Marathon notified Largo of the impending sale to Box. Largo did not exercise its preferential right. Box did not notify Phillips that it was purchasing an interest in South-Pass.
On February 28, 1985 Marathon transferred the pipeline interest to Box. The next day Box assigned the interest to CKB Petroleum, Inc. ("CKB"). In a newsletter dated March 1, 1985, Box (then "OKC") stated that CKB had ascended to ownership of the pipeline through assignment from Box. On March 1, 1985, Box signed a twenty-year contract with CKB for the transportation of Block 89 oil at $2.75 per barrel. Marathon continued to operate the entire pipeline system. Box deducted $2.75 per barrel from the net profits account and paid that amount to CKB, which was owned by Box Brothers Holding Company. Box's oil and gas accounting expert witness, Mr. Bob Way, agreed that CKB and Box were related parties.
Under Paragraph IV(e)(1) of the Farmout agreement, Box could deduct from the net profits account the cost of transportation and other services necessary for operating the Block 89 lease. However, Box did not act as a good administrator and as a reasonably prudent operator for the mutual benefit of itself and Phillips when it continued to charge the $2.75 per barrel for transportation costs. However, under Paragraph IV(f) of the Farmout agreement, Phillips is precluded from challenging the correctness of Box's statements at the expiration of one year if previously it did not raise any objection.
Box bought the interest in the pipeline on February 28, 1985, and had a duty not to overcharge for the transportation cost. Under the Farmout agreement, Phillips could not challenge the ongoing overcharge after one year from the time it had notice of the overcharge. Box did not show that it rendered statements to Phillips reflecting the excessive transportation charge that was deducted and reverted back to Box's company for more than one year before Phillips objected to the charge.
Phillips claims that Exhibit P-23 provides the instructions for completing the Oil Transportation Allowance Report for completing the statements. The payors were instructed to enter the number "6" in column 11 of the report form if 100 percent of the transportation costs were incurred under arm's length conditions. Box placed the number "6" in column 11 of its reports. However, the transportation costs were not incurred under arm's length conditions because Box had bought the interest in the pipeline, and the transportation cost was deducted from the net profits account and paid to CKB, which was owned by Box.
The trial court found that the witness Mr. Kennedy J. Gilly, Jr. knew of the pipeline purchase in 1985. Mr. Gilly represented Phillips as outside trial counsel in the earlier lawsuits against Box. Mr. Gilly testified that in the past he may have read statements in Box's annual or quarterly reports about Box's purchase of an in Interest in South-Pass pipeline. However, Mr. Gilly testified that he first became aware of the transportation cost deductions from the net profits account when Bannister pointed it out.
According to Mr. Bannister, he first discovered the improper transportation deductions in late 1988 or early 1989 when he reviewed work papers produced by Box's outside auditors. Phillips raised the matter with Box and requested information about the claim in a letter of May 30, 1989. Phillips made a formal demand on May 18, 1990 that Box repay the charges, and Phillips filed suit against Box on August 2, 1990. Phillips questioned the transportation cost within one year from the time Phillips became aware of the overcharge. Therefore, Phillips is entitled to reimbursement for the overcharged amount from the time that Box's company obtained an interest in the pipeline because Box reverted the amount of the over charge back to one of its own companies. At that time Box did not live up to its obligation to act as a reasonably prudent operator for the mutual benefit of itself and Phillips. The trial court clearly erred in finding that Phillips had knowledge that was tantamount to waiver and ratification of Box's overcharge. Phillips questioned Box's pipeline charge within one year of its knowledge that Box made the overcharge.
On remand, Box should credit the total of $22,193,540 for the overcharge to the net profits account for Block 89, and Phillips is entitled to one-third of that amount or $7,323,868 under the Farmout agreement for the amount owed through January 31, 1996. The case is remanded also to determine the amount of the overcharged cost that should be credited to the net profits account for Block 89 after January 31, 1996 consistent with this opinion.
REVERTING OVERIDING ROYALTY
Box contends that the trial court erred in granting judgment in favor of Phillips in the amount of $1,581,000 on Phillips' reverting royalty claim. Box maintains that the trial court used the wrong method to account for a reverting royalty, and further that Phillips did not present competent evidence of damages relating to any reverting royalty.
Box contends that the trial court erred in finding that the reverting royalty was triggered by the monthly balance of the net profits rather than the cumulative balance on an annual basis. At issue is whether in months in which there is no net profit as determined under paragraphs IV(d), (e), and (f) of the Farmout agreement, Box is obligated to pay Phillips an overriding royalty.
Phillips has stipulated that no additional overriding royalties are due from January 1996 through the date of the trial court's judgment. In each of those months, there were "net profits," so no override became due. At issue are the periods from 1989 through January 1996 and the future.
A contract is considered to be the law of the parties, and courts first look to its terms to determine the parties' intent. La.C.C. arts. 1983, 2045, and 2046. A contract is ambiguous when it is uncertain as to the parties' intentions or is susceptible to more than one reasonable meaning under the circumstances. Dixie Campers, Inc. v. Vesely Co., 398 So.2d 1087, 1089 (La. 1981); Jones v. East Baton Rouge Parish School Bd., 94-0390 (La.App. 1 Cir. 12/22/94); 648 So.2d 453, 457. Whether a contract is ambiguous is a question of law requiring a de novo review, which is a determination of whether the trial court's decision is legally correct. Id. at 457. If the particular contractual provision is ambiguous, courts must look to parol evidence to clarify the ambiguity or determine the intentions of the parties. Id. The ambiguous provision in the contract must be construed against the party who composed its text. La.C.C. 2056, Insurance Co. of North America v. Solari Parking, Inc., 370 So.2d 503, 507 (La. 1979); Jones, supra, 648 So.2d at 458.
Paragraph IV(f) of the Farmout agreement states:
(f) On or before the last day of each calendar month, or as soon thereafter as reasonably possible, OKC [Box] shall furnish to Aminoil [Phillips] a detailed statement clearly reflecting the condition of the net profits account as of the close of business on the last day of the preceding calendar month. Any deficit or loss (excess of charges over credits) reflected by any such statement shall be carried forward for the next and succeeding months until such deficit or loss has been liquidated. In case a net profit (an excess of credits over charges) is reflected by any such statement, payment to Aminoil [Phillips] of Aminoil [Phillips]'s net profits percentage interest of the amount of such credit balance shall be enclosed with the statement rendered to Aminoil [Phillips]. No change of ownership of the net profits interest shall be binding upon OKC [Box], until OKC [Box] is furnished with certified or photocopies, satisfactory to OKC [Box], of the original recorded documents evidencing such change. Notwithstanding any change of ownership in the net profits interest, OKC [Box] shall never be required to make payments nor to render reports required hereunder with respect to such net profits interest to more than one party, and, in the event the net profits interest is owned by more than one party, OKC [Box] may withhold further payments and reports with respect to such net profits interest until all of such owners of the net profits interest have designated a single party to act for all of them hereunder in all respects, including, but not by way of limitation, the giving and receiving of all notices and the receipt of all payments and reports. If, at the expiration of one year from the rendition of a particular statement, Aminoil [Phillips] has raised no objection to the items therein reflected nor as to the debits or credits upon which such items are based, such statements shall be conclusively deemed to be correct for all purposes, and OKC [Box] shall no longer be required to maintain any records in connection therewith.
Paragraph IV(k) provides:
(k) It is understood and agreed that in the event net profits terminate at any time while OKC [Box] is receiving its share of the proceeds from production, the overriding royalty described in Article IV shall automatically revert to Aminoil [Phillips] and remain effective until net profits are again received at which time Aminoil [Phillips]'s net profits interest shall automatically be resumed.
Box urges that Paragrah IV(k) is ambiguous because it can be interpreted to mean that when based on a cumulative balance, if the net profits terminate at any time, then the overriding royalty shall automatically revert to Aminoil [Phillips] until net profits are again received calculated on a cumulative basis. Box contends that the parties intended to use utter cessation of the net profits as opposed to a temporary interruption. Box points out that drafts of the Farmout agreement used the word "interrupt" rather than "terminate" as stated in the final version to provide for reverting royalties in the event net profits terminate at any time. Box argues that there must be an absolute termination of net profits to trigger the reversionary royalty clause. Therefore, Box claims that the Farmout agreement is ambiguous and should be construed against Phillips' interpretation of the terms because Phillips drafted the Farmout agreement. Box asserts that its witnesses testified that if there is a monthly loss in the net profits account but the net profits account has a positive cumulative balance, Phillips receives neither a net profits payment nor an overriding royalty payment under the Farmout agreement. Box avers that in order to determine whether a net profits payment, overriding royalty payment, or no payment is to be made, one must look at the cumulative or total balance of the net profits account.
However, according to Paragraph IV(k) of the Farmount agreement, when the net profits terminate, Phillips is entitled to a royalty interest, until net profits are again received. At that time Aminoil [Phillips]'s net profits interest shall automatically be resumed. By the construction of the sentence in Paragraph IV(k), the net profits do not absolutely terminate but are temporarily terminated or temporarily interrupted whether the net profits are calculated on a monthly basis or a cumulative balance of the account.
Further, Paragraph IV(k) clearly provides for Aminoil [Phillips] either receiving a net profit payment or an overriding royalty payment. Paragraph IV(k) does not provide that Phillips receives neither a net profits payment nor an overriding royalty payment at anytime.
The Farmout agreement provides that: (1) Box must determine whether there is a net profit at the end of each month by netting the monthly credits required by Paragraph IV(d) against the monthly charges allowed by paragraph IV(e) and any deficit carried forward from previous months; (2) when there is a net profit, Box must pay 33 percent of the net profit to Phillips; and (3) if there are no net profits for the month, Box must pay Phillips an overriding royalty (of 1/12 of 1/4 of 8/8 production) until the time that there are net profits again.
By the terms of the Farmout agreement, all of the calculations are made on a monthly basis. The net profit is figured at the end of each month by netting the monthly credits against the monthly charges. Any deficit is carried forward on a monthly basis and is calculated with the monthly charges. There is nothing in the Farmout agreement that contradicts this meaning. However, Box's interpretation does not follow the terms of Paragraph IV(f) and IV(k).
The trial court also noted that for five months Box calculated the distribution based on a monthly cumulative expense ratio before computing Phillips' percentage. Under La.C.C. art. 2046, when the words of a contract are clear and explicit and lead to no absurd consequences, no further interpretation may be made in search of the parties' intent. As a matter of law the terms of the Farmout agreement are not ambiguous.
The trial court did not err in finding that the Farmout agreement reflects that a monthly approach should be used as the accounting procedural standard.
DOUBLE DAMAGES, ATTORNEY'S FEES DISSOLUTION OF THE FARMOUT AGREEMENT
Phillips contends that the trial court erred in failing to award Phillips reasonable attorney's fees and double damages under the Louisiana Mineral Code §§ 137-142, and §§ 212.21-212.23, as well as judicial dissolution of Box's sublease on Block 89 as authorized by Mineral Code §§ 140-142. Box asserts that the trial court believed that it could make these awards only if Box engaged in bad faith litigation. Phillips asserts that "bad faith" is not the statutory test but double damages and reasonable attorney's fees also may be granted if Box acted willfully and without reasonable grounds for failure to pay. Phillips also avers that the trial court abused its discretion under § 140 of the Mineral Code by failing to dissolve the sublease.
La.R.S. 31:139 provides:
§ 139. Effect of payment in response to notice
If the lessee pays the royalties due in response to the required notice, the remedy of dissolution shall be available unless it be found that the original failure to pay was fraudulent. The court may award as damages double the amount of royalties due, interest on that sum from the date due, and a reasonable attorney's fee, provided the original failure to pay royalties was either fraudulent or willful and without reasonable grounds. In all other cases, such as mere oversight or neglect, damages shall be limited to interest on the royalties computed from the date due, and a reasonable attorney's fee if such interest is not paid within thirty days of written demand therefor. [Emphasis added.]
La.R.S. 31:140 states:
§ 140 Effect of nonpayment in response to notice or failure to state cause therefor
If the lessee fails to pay royalties due or fails to inform the lessor of a reasonable cause for failure to pay in response to the required notice, the court may award as damages double the amount of royalties due, interest on that sum from the date due, and a reasonable attorney's fee regardless of the cause for the original failure to pay royalties. The court may also dissolve the lease in its discretion. [Emphasis added.]
La.R.S. 31:141 provides:
§ 141. Dissolution not a favored remedy
In a case where notice of failure to pay royalties is required, dissolution should be granted only if the conduct of the lessee, either in failing to pay originally or in failing to pay in response to the required notice, is such that the remedy of damages is inadequate to do justice.
La.R.S. 31:142 states:
§ 142. Dissolution may be partial or entire
A mineral lease may be dissolved partially or in its entirety. A decree of partial dissolution may be made applicable to a specified portion of land, to a particular stratum or strata, or to a particular mineral or minerals.
La.R.S. 31:212.23 provides:
§ 212.21. Nonpayment of production payments or royalties; notice prerequisite to judicial demand
If the owner of a mineral production payment or a royalty owner other than a mineral lessor seeks relief for the failure of a mineral lessee to make timely or proper payment of royalties or the production payment, he must give his obligor written notice of such failure as a prerequisite to a judicial demand for damages.
Under the Louisiana Mineral Code, the trial court has the discretion to award double damages and attorney's fees provided the failure to make timely payments was either fraudulent or willful and without reasonable grounds. Dissolution is not a favored remedy; however, the trial court has the discretion to dissolve the lease partially or entirely.
In its reasons for judgment, the trial court noted that it did not feel compelled to punish either side. It did not grant Phillips double damages, attorney's fees, or dissolution of the Farmout agreement. The trial court also dismissed Box's counterclaim that Phillips should be responsible for damages due to Box's extra expenses concerning a bond issue as opposed to a bank loan. The trial court noted the extensive litigation, expert testimony, and the issues on the interpretation of the Farmout agreement. Considering the complexity of the issues of this case, we cannot find that the trial court abused its discretion in its rulings to deny Phillips recovery of double damages, attorney's fees, or dissolution of the Farmout agreement. Box's actions in challenging the issues in this litigation were not fraudulent or willful and without reasonable grounds.
INTEREST
We agree with Phillips' assertions concerning commencement of the award of interest that was not stated in the trial court's judgment. Interest accrues from the dates that the amounts were due to Phillips. La.C.C. art. 2000; Hilliard v. Amoco Production Co., 95-1366 (La.App. 3 Cir. 10/9/96), 688 So.2d 1176.
CONCLUSION
Therefore, giving credit to Box for $5,779,589 that it credited to the net profits account, Box should have credited an additional sum of $63,820,416 from the TETCO settlement to the net profits account. Phillips is entitled to one-third of that amount or $21,060,737.
Box may deduct royalty payments from the net profits account only when such payments are made to the federal government.
Box may deduct 58 cents per barrel for pipeline transportation costs. Through January 31, 1996, Box overcharged the net profits account by $22,193,540 for the transportation costs. Phillips is entitled to one-third of that amount, or $7,323,868, and an accounting for all such deductions after January 31, 1996 on remand. The amounts of interest are to be determined on remand in accordance with Exhibit P-1(H), which Box attached in its appendix to its appellate brief listed as #14. This Exhibit is annexed to this opinion as Appendix A.
Accordingly, the judgment of the trial court is affirmed in part, reversed in part, and amended. The matter is remanded for proceedings consistent with this opinion.
AFFIRMED IN PART; REVERSED IN PART; AMENDED REMANDED
EXHIBIT H (Summary)
PHILLIPS PETROLEUM COMPANY v. OKC LIMITED PARTNERSHIP SOUTH PASS BLOCK 89 OFFSHORE LOUISIANA NET PROFITS ACCOUNT SUMMARY OF PIPELINE TRANSPORTATION COST ADJUSTMENTS FOR THE PERIOD JANUARY 1, 1985 THROUGH JANUARY 31, 1996Less Estimated Actual Expenses
Total Credits for Transportation Capital Credit (Charges) Payments to Operating Insurance Expenses Expenditures To Net Profits Year CKB Petroleum Expenses Expense Adjustment Adjustment Account _____________________________________________________________________________________________________________________________________ 1985 $4,314,481 ($41,279) ($88,300) $4,184,901 ($4,757,000) ($572,099) 1986 4,753,168 (43,548) (49,360) 4,660,259 0 4,660,259 1987 3,872,549 (43,223) (45,417) 3,783,909 0 3,783,909 1988 2,850,682 (44,843) (41,564) 2,764,276 0 2,764,276 1989 2,368,213 (45,609) (31,494) 2,291,110 0 2,291,110 1990 1,665,064 (58,939) (25,731) 1,580,394 0 1,580,394 1991 1,419,207 (54,942) (35,635) 1,328,631 (1,771) 1,326,860 1992 1,519,302 (46,979) (33,516) 1,438,807 (134,274) 1,304,533 1993 1,963,153 (74,073) (27,026) 1,862,054 (56,377) 1,805,677 1994 1,779,611 (59,505) (43,550) 1,676,555 (11,169) 1,665,386 1995 1,556,270 (37,911) (41,034) 1,477,325 0 1,477,325 1996 118,829 (10,258) (2,662) 105,909 0 105,909 ___________ __________ __________ ___________ ____________ ___________ $28,180,529 ($561,109) ($465,289) $27,154,131 ($4,960,591) $22,193,540 ___________ __________ __________ ___________ ____________ ___________ Barrels of oil transported 10,247,000 ___________ Amount per barrel of oil transported $2.75 ($0.05) (0.05) (0.48) $2.17 ___________ __________ _________ _________ __________ APPENDIX A (1) PHILLIPS PETROLEUM COMPANY v. OKC LIMITED PARTNERSHIP SOUTH PASS BLOCK 89 OFFSHORE LOUISIANA NET PROFITS ACCOUNT CALCULATION OF PIPELINE TRANSPORTATION COST ADJUSTMENTS FOR THE PERIOD JANUARY 1, 1985 THROUGH JANUARY 31, 1996 Less Estimated Actual Expenses Total Credits for Transportation Capital Credit (Charges) Payments to Operating Insurance Expenses Expenditures To Net Profits Year Month CKB Petroleum Expenses Expense Adjustment Adjustment Account __________________________________________________________________________________________________________________________________________ 1985 January $0 $0 $0 February (3,397) (3,397) ($4,757,000) (4,760,397) March $494,205 (6,783) ($8,830) 478,592 478,592 April 474,573 (3,367) (8,830) 462,376 462,376 May 463,348 (3,440) (8,830) 451,078 451,078 June 391,988 (3,367) (8,830) 379,791 379,791 July 428,582 (3,522) (8,830) 416,231 416,231 August 311,149 (3,373) (8,830) 298,945 298,945 September 416,911 (3,415) (8,830) 404,666 404,666 October 455,070 (3,880) (8,830) 442,361 442,361 November 383,138 (3,368) (8,830) 370,940 370,940 December 495,517 (3,367) (8,830) 483,320 483,320 __________ _________ _________ __________ ____________ __________ $4,314,481 ($41,279) ($88,300) $4,184,901 ($4,757,000) ($572,099) __________ _________ _________ __________ ____________ __________ 1986 January $493.221 ($3,367) ($4,113) $485,740 $485,740 February 413,732 (3,391) (4,113) 406,228 406,228 March 439,280 (3,594) (4,113) 431,572 431,572 April 383,119 (3,891) (4,113) 375,115 375,115 May 398,186 (3,800) (4,113) 390,272 390,272 June 360,616 (3,510) (4,113) 352,992 352,992 July 391,091 (3,910) (4,113) 383,068 383,068 August 426,487 (3,656) (4,113) 418,718 418,718 September 370,996 (3,563) (4,113) 363,320 363,320 October 378,333 (3,634) (4,113) 370,586 370,586 November 343,166 (3,691) (4,113) 335,361 335,361 December 354,941 (3,541) (4,113) 347,286 347,286 __________ _________ _________ __________ ____________ __________ $4,753,168 ($43,548) ($49,360) $4,660,259 $0 $4,660,259 __________ _________ _________ __________ ____________ __________ 1987 January $336,871 ($3,538) ($3,785) $329,548 $329,548 February 318,999 (3,525) (3,785) 311,689 311,689 March 342,389 (3,524) (3,785) 335,081 335,081 April 337,492 (3,556) (3,785) 330,151 330,151 May 379,729 (3,568) (3,785) 372,376 372,376 June 339,877 (3,557) (3,785) 332,536 332,536 July 352,782 (3,642) (3,785) 345,356 345,356 August 328,960 (3,550) (3,785) 321,626 321,626 September 270,089 (3,559) (3,785) 262,746 262,746 October 280,907 (3,567) (3,785) 273,555 273,555 November 282,446 (3,924) (3,785) 274,738 274,738 December 302,008 (3,715) (3,785) 294,509 294,509 __________ _________ _________ __________ ____________ __________ $3,872,549 ($43,223) ($45,417) $3,783,909 $0 $3,783,909 __________ _________ _________ __________ ____________ __________ APPENDIX A (2) PHILLIPS PETROLEUM COMPANY v. OKC LIMITED PARTNERSHIP SOUTH PASS BLOCK 89 OFFSHORE LOUISIANA NET PROFITS ACCOUNT CALCULATION OF PIPELINE TRANSPORTATION COST ADJUSTMENTS FOR THE PERIOD JANUARY 1, 1985 THROUGH JANUARY 31, 1996 Less Estimated Actual Expenses Total Credits for Transportation Capital Credit (Charges) Payments to Operating Insurance Expenses Expenditures To Net Profits Year Month CKB Petroleum Expenses Expense Adjustment Adjustment Account __________________________________________________________________________________________________________________________________________ 1988 January $206,261 ($4,199) ($3,464) $198,599 $198,599 February 209,740 (3,631) (3,464) 202,645 202,645 March 207,842 (3,559) (3,464) 200,819 200,819 April 136,893 (3,668) (3,464) 129,762 129,762 May 192,190 (3,758) (3,464) 184,968 184,968 June 320,370 (3,671) (3,464) 313,235 313,235 July 299,574 (3,709) (3,464) 292,401 292,401 August 272,930 (3,670) (3,464) 265,796 265,796 September 257,813 (3,857) (3,464) 250,493 250,493 October 275,307 (3,668) (3,464) 268,175 268,175 November 243,026 (3,686) (3,464) 235,876 235,876 December 228,737 (3,769) (3,464) 221,505 225,505 __________ _________ _________ __________ ____________ __________ $2,850,682 ($44,843) ($41,564) $2,764,276 $0 $2,764,276 __________ _________ _________ __________ ____________ __________ 1989 January $239,858 ($3,734) ($2,625) $233,499 $233,499 February 225,941 (3,672) (2,625) 219,644 219,644 March 220,804 (3,672) (2,625) 214,507 214,507 April 258,794 (3,824) (2,625) 252,346 252,346 May 176,773 (3,817) (2,625) 170,331 170,331 June 203,597 (3,780) (2,625) 197,193 197,193 July 184,565 (3,791) (2,625) 178,150 178,150 August 175,298 (3,800) (2,625) 168,874 168,874 September 170,523 (3,805) (2,625) 164,093 164,093 October 126,301 (3,798) (2,625) 119,878 119,878 November 189,851 (3,943) (2,625) 183,284 183,284 December 195,908 (3,972) (2,625) 189,311 189,311 __________ _________ _________ __________ ____________ __________ $2,368,213 ($45,609) ($31,494) $2,291,110 $0 $2,291,110 __________ _________ _________ __________ ____________ __________ 1990 January $186,253 ($3,438) ($2,144) $180,671 $180,671 February 70,605 (3,780) (2,144) 64,680 64,680 March 167,783 (4,966) (2,144) 160,673 160,673 April 139,390 (4,087) (2,144) 133,159 133,159 May 158,033 (4,190) (2,144) 151,699 151,699 June 118,720 (4,107) (2,144) 112,469 112,469 July 147,772 (6,287) (2,144) 139,341 139,341 August 135,896 (4,101) (2,144) 129,651 129,651 September 126,705 (5,853) (2,144) 118,708 118,708 October 137,650 (4,346) (2,144) 131,159 131,159 November 135,352 (4,109) (2,144) 129,099 129,099 December 140,905 (9,675) (2,144) 129,085 129,085 __________ _________ _________ __________ ____________ __________ $1,665,064 ($58,939) ($25,731) $1,580,394 $0 $1,580,394 __________ _________ _________ __________ ____________ __________ APPENDIX A (3) PHILLIPS PETROLEUM COMPANY v. OKC LIMITED PARTNERSHIP SOUTH PASS BLOCK 89 OFFSHORE LOUISIANA NET PROFITS ACCOUNT CALCULATION OF PIPELINE TRANSPORTATION COST ADJUSTMENTS FOR THE PERIOD JANUARY 1, 1985 THROUGH JANUARY 31, 1996 Less Estimated Actual Expenses fn1a fn2 fn1a fn2 fn2 fn1a fn2 fn1a fn2 fn1a fn2 fn2 fn2 fn2 fn2 fn2 fn2 fn2 fn1a fn2 fn2 fn2 fn1a fn2 fn1a fn2 fn1a fn2 fn2 fn1a fn2 fn2 fn2 fn1a Total Credits for Transportation Capital Credit (Charges) Payments to Operating Insurance Expenses Expenditures To Net Profits Year Month CKB Petroleum Expenses Expense Adjustment Adjustment Account __________________________________________________________________________________________________________________________________________ 1991 January $140,698 ($4,111) ($2,970) $133,618 $133,618 February 131,061 (4,118) (2,970) 123,974 123,974 March 128,049 (4,351) (2,970) 120,729 120,729 April 132,284 (4,552) (2,970) 124,762 124,762 May 117,396 (4,467) (2,970) 109,960 109,960 June 91,280 (4,327) (2,970) 83,984 83,984 July 130,703 (4,795) (2,970) 122,938 122,938 August 128,853 (4,395) (2,970) 121,488 121,488 September 121,584 (4,988) (2,970) 113,627 113,627 October 106,230 (4,515) (2,970) 98,745 98,745 November 99,021 (4,627) (2,970) 91,425 91,425 December 92,048 (5,698) (2,970) 83,381 ($1,771) 81,610 __________ _________ _________ __________ ________ __________ $1,419,207 ($54,942) ($35,635) $1,328,631 ($1,771) $1,326,860 __________ _________ _________ __________ ________ __________ 1992 January $88,153 ($3,287) ($2,793) $82,073 ($144) $81,929 February 91,001 (3,536) (2,793) 84,671 (13,027) 71,645 March 97,131 (3,310) (2,793) 91,028 91,028 April 98,749 (3,331) (2,793) 92,625 (28,000) 64,625 May 94,443 (3,336) (2,793) 88,314 (84,074) 4,241 June 175,511 (4,950) (2,793) 167,768 (9,030) 158,738 July 142,232 (3,286) (2,793) 136,154 136,154 August 157,103 (4,207) (2,793) 150,103 150,103 September 150,014 (3,847) (2,793) 143,374 143,374 October 146,568 (4,116) (2,793) 139,659 139,659 November 141,135 (3,788) (2,793) 134,554 134,554 December 137,261 (5,984) (2,793) 128,484 128,484 __________ _________ _________ __________ __________ __________ $1,519,302 ($46,979) ($33,516) $1,438,807 ($134,274) $1,304,533 __________ _________ _________ __________ __________ __________ 1993 January $161,254 ($4,333) ($2,252) $154,669 $154,669 February 173,755 (4,640) (2,252) 166,863 ($3,914) 162,950 March 189,263 (4,581) (2,252) 182,430 182,430 April 169,771 (19,883) (2,252) 147,636 147,636 May 174,125 (5,230) (2,252) 166,642 (31,210) 135,432 June 148,711 (4,574) (2,252) 141,885 (3,261) 138,624 July 183,018 (4,331) (2,252) 176,435 (512) 175,923 August 170,142 (4,856) (2,252) 163,034 163,034 September 148,250 (5,526) (2,252) 140,472 (2,575) 137,897 October 140,636 (3,932) (2,252) 134,452 134,452 November 152,532 (4,828) (2,252) 145,452 145,452 December 151,695 (7,360) (2,252) 142,083 (14,905) 127,178 __________ _________ _________ __________ _________ __________ $1,963,153 ($74,073) ($27,026) $1,862,054 ($56,377) $1,805,677 __________ _________ _________ __________ _________ __________ APPENDIX A (4) PHILLIPS PETROLEUM COMPANY v. OKC LIMITED PARTNERSHIP SOUTH PASS BLOCK 89 OFFSHORE LOUISIANA NET PROFITS ACCOUNT CALCULATION OF PIPELINE TRANSPORTATION COST ADJUSTMENTS FOR THE PERIOD JANUARY 1, 1985 THROUGH JANUARY 31, 1996 Less Estimated Actual Expenses fn2 fn1a fn2 fn2 fn2 fn2 fn2 fn2 fn2 fn2 fn2 fn2 fn2 fn2 fn2 fn2 fn2 fn2 fn2 fn2 fn2 fn2 fn2 fn2 fn2 fn2 Total Credits for Transportation Capital Credit (Charges) Payments to Operating Insurance Expenses Expenditures To Net Profits Year Month CKB Petroleum Expenses Expense Adjustment Adjustment Account __________________________________________________________________________________________________________________________________________ 1994 January $140,078 ($4,317) ($3,629) $132,131 ($11,169) $120,962 February 141,772 (3,993) (3,629) 134,150 134,150 March 157,869 (5,216) (3,629) 149,024 149,024 April 168,206 (5,045) (3,629) 159,533 159,533 May 166,407 (4,965) (3,629) 157,813 157,813 June 159,597 (4,258) (3,629) 151,709 151,709 July 147,467 (5,713) (3,629) 138,125 138,125 August 139,791 (5,190) (3,629) 130,973 130,973 September 127,785 (4,952) (3,629) 119,204 119,204 October 129,285 (5,307) (3,629) 120,348 120,348 November 128,841 (5,779) (3,629) 119,433 119,433 December 172,513 (4,772) (3,629) 164,112 164,112 __________ _________ _________ __________ _________ __________ $1,779,611 ($59,505) ($43,550) $1,676,555 ($11,169) $1,665,386 __________ _________ _________ __________ _________ __________ 1995 January $170,422 ($3,592) ($3,419) $163,411 $163,411 February 129,129 (3,967) (3,419) 121,742 121,742 March 138,474 (3,368) (3,419) 131,687 131,687 April 122,863 (3,327) (3,419) 116,117 116,117 May 127,940 (3,318) (3,419) 121,203 121,203 June 117,626 (3,654) (3,419) 110,552 110,552 July 122,612 (652) (3,419) 118,541 118,541 August 126,521 (2,751) (3,419) 120,351 120,351 September 129,089 (4,327) (3,419) 121,342 121,342 October 112,090 (2,643) (3,419) 106,028 106,028 November 123,252 (2,704) (3,419) 117,129 117,129 December 136,251 (3,609) (3,419) 129,223 129,223 __________ _________ _________ __________ ___________ __________ $1,556,270 ($37,911) ($41,034) $1,477,325 $0 $1,477,325 __________ _________ _________ __________ ___________ __________ 1996 January $118,829 ($10,258) ($2,662) $105,909 $105,909 __________ _________ _________ __________ ___________ ___________ $118,829 ($10,258) ($2,662) $105,909 $0 $105,909 __________ _________ _________ __________ ___________ ___________ Totals $28,180,529 ($561,109) ($465,289) $27,154,131 ($4,960,591) $22,193,540 ___________ __________ __________ ___________ ____________ ___________