Full opinion text
MEMORANDUM OF OPINION FINDINGS OF FACT AND CONCLUSIONS OF LAW UPON REMAND WESLEY E. BROWN, Chief Judge. A. Statement of the Case. This is a continuation of six consolidated interpleader actions filed in 1963, involving title to, and rights in the commodity or element known as “helium,” which are reported as Northern Natural Gas Company v. Grounds, D.C., 292 F.Supp. 619, and Northern Natural Gas Company, et al. v. Grounds, 10 Cir., 441 F.2d 704 (1971), cert. den., 404 U.S. 951, 92 S.Ct. 268, 30 L.Ed.2d 267; 404 U.S. 1063, 92 S.Ct. 732, 30 L.Ed.2d 751; 404 U.S. 1065, 92 S.Ct. 732, 30 L.Ed.2d 754. The first trial of these actions, had in October 23, 1967 — January 5, 1968, involved the ownership of helium contained in or extracted from natural gas produced from wells drilled in the Hugoton gas areas of Kansas, Oklahoma, and Texas. Further description of issues involved in these interpleader actions may be found in the reported decisions, supra, and will not be repeated except insofar as it may be necessary for discussion of issues which remain after remand to this court. At the first trial, it was found that the Landowners did convey to their lessees all rights and title to helium contained in the natural gas stream, except those rights specifically reserved. It was further found that the Lessee-Producers, who sold and delivered gas to pipeline company purchasers, pursuant to gas purchase contracts, had likewise conveyed title to the helium component of the natural gas stream, and that the plaintiffs in interpleader, the helium extracting companies, or “Helex group” had title to the helium component of the natural gas stream. Northern Natural Gas Company v. Grounds, 292 F.Supp. 619, at 686-687. On appeal, the Court of Appeals sustained these findings, ruling that, absent specific reservations, the grant of “gas” by the Landowners in their leases effectively conveyed all components of the natural gas stream, including helium, and that the gas sales contracts between the Lessee-Producers and the pipeline companies, likewise conveyed all components of the natural gas stream, including helium. On appeal from this court’s determination that § 11 of the Helium Act Amendments, 50 U.S.C. § 167i, did not alter the scope of the gas purchase contracts, so as to allow the Lessee-Producers to share in revenues derived by the Helex companies from their sales of helium to the government, the Lessee-Producers successfully persuaded the Court of Appeals that they were entitled to compensation for the reasonable value of helium contained in the natural gas stream. The appellate court felt that the producers fell into a “void” between FPC regulated gas purchase contracts and the helium legislation regulated by the Bureau of Mines: (441 F.2d at 722-723): Neither the FPC nor the Bureau of Mines has jurisdiction over the helium value of the natural gas. Although the gas purchase contracts have not been abrogated, the price provisions thereof have been superseded by FPC rate regulation. The regulated lessee-producers must continue to sell the dedicated gas and have no statutory or contractual method of obtaining any benefit for the increased value. Two results are possible. The first is that the lessee-producers must deliver the gas at the FPC service rate, based on fuel value, and receive nothing for the helium value. This produces a windfall for the pipelines and their Helex subsidiaries. The second is that the lessee-producers are entitled to the reasonable value of the contained helium. This means that the landowners will receive royalties on the value of the helium produced from their lands and the lessee-producers will receive value for the helium content of the natural gas which has been produced by their efforts. We believe that satisfactory utility regulation requires the second result. Otherwise a utility rate may be used to obtain a commodity or service which is not within the contemplation of that rate. (Emphasis supplied.) ■**■»*** In our opinion the reconciliation of the Natural Gas Act and of the 1960 amendments to the Helium Act to attain a symmetrical whole requires the conclusion that the FPC service rates do not apply to deny recovery for the contained helium which is processed in the separation plants. Hence, the lessee-producers recover from the fund the reasonable value of the helium content of the processed gas and they in turn must pay royalty thereon to the landowners. We believe that this result is a valid reconciliation of the statutes and a proper determination of the rights of the parties. The Court of Appeals remanded the interpleader cases, with instructions that this court determine the reasonable value of the helium in question, which determination would be subject to review by the Court of Appeals. B. Proceedings on Remand. After remand, the motion of the United States for leave to intervene as party plaintiff was sustained. [Dkt. 1410, 1429.] The United States is not a party defendant in any respect, and appears in these proceedings on remand solely for the purpose of attempting to prove that the reasonable value of the helium content of the natural gas processed in the helex plants is nominal. [Dkt. 1446, Complaint in Intervention.] Atlantic Richfield Company, a lessee-producer, was also granted leave to intervene in these interpleader actions for the purpose of establishing its claim to a portion of the interpleaded funds. This claim is based upon alleged delivery of helium bearing natural gas which was ultimately processed for extraction by Northern Helex Company. The claim of Atlantic Richfield is designed to determine the status of those lessee-producers whose helium bearing natural gas was sold to others, but ultimately found its way into the conservation extracting plants by means of certain gas-exchange agreements between the pipeline companies and others. [Dkts. 1592, 1601, 1609, 1610.] Prior to trial on remand, this Court also made a determination that Phillips Petroleum Company was a member of the lessee-producer classes in Cases No. KC-1969 and KC-1980: [Dkt. 1614.] . in view of the Mandate from the Court of Appeals, this Court can only conclude that Phillips remains in Cases Nos. KC-1969 and KC-1980 as a member of the class of lessee-producers, insofar as it may have delivered helium contained in gaseous streams to Northern Natural Gas Company (KC-1969) and Panhandle Eastern Pipe Line Company (KC-1980). Its right to share in any ultimate distribution from the inter-pleaded fund will of course depend upon the nature of its contractual arrangements with these two helex processing companies, and may very well require that the Court establish ‘sub-classes’ of lessee-producers in the process of making an allocation of any distribution from the fund which is ultimately ordered. The plaintiffs in interpleader, the Helex group, filed Motions for Summary Judgment [Dkt. 1659] in these actions, upon the basis of the decision of the Supreme Court in Phillips Petroleum Company v. Texaco, 415 U.S. 125, 94 S.Ct. 1002, 39 L.Ed.2d 209, which reversed a decision of the Tenth Circuit, Texaco Inc. v. Phillips Petroleum Company (1973), 481 F.2d 70, to the effect that its opinion on the liability issue in these cases, Northern Natural Gas Company v. Grounds, supra, 441 F.2d 704, established that problems relating to recovery of the value of helium raise federal questions, sufficient to establish jurisdiction under 28 U.S.C. § 1331(a). In finding that there was no “federal question” jurisdiction in Phillips, the Supreme Court made the following observation regarding Grounds, 415 U.S. at p. 128, 94 S.Ct. at p. 1004, 39 L.Ed.2d at pp. 212-213: In other words, the Grounds case simply held that payment for natural gas at rates established or permitted by the Commission under the authority of the Natural Gas Act will not be regarded as payment for the helium constituent and cannot be asserted as a defense to a suit for the recovery of the value of that helium. In short, the federal statutory provisions do not under Grounds create a federal right of recovery, but only preclude the inter-position of a plea of payment to defeat a quasi-contractual suit for the value of the helium. In view of the fact that jurisdiction in this instance depends upon the inter-pleaded fund, and in view of the Mandate from the Court of Appeals, the Court overruled the motions for summary judgment. [Dkt. 1687.] Considerable difficulty was had by court and counsel in interpreting the opinion of the appellate court, and in determining what issues remained for trial in this district court. Despite numerous conferences, counsel was unable to agree upon a pre-trial order, and on January 9, 1974, one was prepared and filed by the court. [Dkt. 1612.] It was determined that the mandate from the Court of Appeals consisted of a judgment entered by that Court on March 2, 1971, the opinion of that court filed March 2, 1971, reported at 441 F.2d 704, and an order filed March 16, 1974 by that Court relating to costs. In the order relating to costs on appeal, the Court ordered: «•****'* 2. The interpleaded fund is the reasonable value at time of sale of the helium content of the natural gas which the Helex group has received from the lessee-producers and which has been processed in the plants of the Helex group for the separation of helium from natural- gas. We leave to the trial court the determination of the time of sale, the points of delivery, and the method of measurement. Such determination shall be subject to review by this Court. * * * * * * 14. This Order covers only costs in the Court of Appeals. District Court costs shall be determined by the District Court, subject to review by this Court. 15. The right of the lessee-producers to interest, and the amount thereof, on any sums which the District Court may adjudge to be due and owing to them shall be determined by the District Court, subject to review by this Court. In the pre-trial order prepared by the Court [Dkt. 1612] it was determined that the issues of fact and law to be determined at trial on remand were: a) A determination of the “reasonable value” at time of sale of the helium content of the natural gas processed at the Helex plants; b) Whether or not the helex companies were accountable in these actions for helium extracted and stored, or extracted and sold privately, or extracted and delivered to the United States, but not paid for, or extracted and vented because of the refusal of the United States to accept further deliveries; c) The proper basis for allocating payments for helium among the lessee-producer class; d) The question of whether or not lessee-producers were entitled to interest on any sums awarded for the value of helium, and if so, at what rate, and from what date; e) A determination of the proper basis for computing royalties which would accrue to the benefit of landowners. In settling the pre-trial order, the court permitted the parties to attach as appendices to the order, statements concerning various other contended issues which each group believed to be of importance to this Court’s action on remand. These appear as Appendix A through E in the pre-trial order. C. The Helium Extraction Process. Plaintiffs in these interpleader actions are: Northern Natural Gas Company, an interstate pipeline company, and its two wholly-owned subsidiaries, Northern Helex Corporation, and Northern Natural Gas Products Company; Cities Service Gas Company, Cities Service Cryogenics, Inc., and Cities Service Helex, Inc. The latter two entities are wholly owned subsidiaries of Cities Service Company, which owns approximately 79% of the stock of Cities Service Gas Company; and National Helium Corporation, which joined Panhandle Eastern Pipe Line Company as party defendant in Case No. KC-1980. Panhandle owns 50% of the stock of National Helium, and the remaining 50% is owned by National Chemical and Distillers Company. The three helium extracting plants involved in these interpleader actions are the “Jayhawk Plant,” operated by Cities Service Helex, Inc., at Ulysses, Kansas, which began extraction processes in June, 1963; the “Bushton Plant,” operated by Northern Helex Co., at Bushton, Kansas, beginning December, 1962, and the “Liberal Plant,” operated by National Helium Corporation, at Liberal, Kansas, beginning July, 1963. (U.S. Exh. 1). None of these plants are presently selling conservation helium to the Bureau of Mines due to cancellation of contracts by the United States. The United States — Helex Company contracts appear as L.P. Exhibits 2-3, 2-4, and 2-5. Since the 1960 Helium Act Amendments, three private extracting plants have supplied significant quantities of helium to commercial markets. (U.S. Ex. 2). These are: a) The “Otis Plant,” owned by George A. Angle, d/b/a Kansas Refined Helium Company, at Otis, Kansas, which began operations in April, 1966; b) The “Greenwood Plant,” owned by Alamo Chemical Company, a subsidiary of Phillips Petroleum Company and Gardner Cryogenics, at Elkhart, Kansas, which began operations in December 1966; and c) The “Sunflower Plant,” owned by Cities Service Cryogenics, Inc., a subsidiary of Cities Service Gas Company, and Helium, Inc., a subsidiary of Kansas-Nebraska Pipeline Company. This plant is located at Scott City, Kansas, and began operations in October, 1968. The United States has no connection with any of these three private plants, and none are involved with sales of conservation helium, which is the subject matter of these actions. [Tr.2d 19:2191] Prior to discussing the scope of evidence regarding “reasonable value” introduced at the second trial, it would be beneficial to briefly review the process of extracting helium and to set in context certain definitions of the various states of helium as it progresses through the extraction process. Helium occurs in nature as a constituent of natural gas, and natural gas which contains a significant percentage of helium is referred to as “helium bearing natural gas.” The molecules of helium which are contained in this gas, are “pure” for helium is inert and will not combine chemically with any other element. Since the helium in the gas is commingled with other constituents, it is referred to in testimony, and in these findings as “commingled helium.” Commingled helium is what is produced from the natural gas wells and delivered by the Lessee-Producers to the pipeline companies. The helium transported by the pipeline companies to the helex plants is contained in the natural gas stream, and, as delivered to the helex companies, it is “commingled helium.” Some helium bearing natural gas which is delivered to the pipeline companies is not processed through helium extracting plants, and thus, some commingled helium is transmitted to fuel gas consumers without the helium first being extracted, and consequently, some commingled helium is wasted through vents from stoves and furnaces. When helium bearing natural gas is delivered by the pipeline companies to a helex extracting plant, the commingled helium in that gas stream is extracted by a process which depends upon the fact that one property of helium is that it does not liquefy until it approaches a temperature nearing absolute zero, or -453 °F. Although procedures differ slightly in the three helex plants, the general extracting process consists of drying and cooling the raw gas stream to successively lower temperatures in various stages by means of compressors, dehydrators, heat exchange plates, separators, “cold boxes,” and other equipment, during which various hydrocarbons liquefy and drop out of the gas stream, leaving an “end product” which is sold to the United States as “crude helium.” Thus, at the Northern helex plant, the whole gas stream is first cooled to about -30°F, at which point about 20% of the propane, 50% of the butane, 85% of the pentanes and 100% of the hexanes and heavier hydrocarbons elements are liquefied and removed. As temperatures are lowered further, all of the liquid hydrocarbons are “swept out” of the gas stream, until at -275° all liquids are extracted leaving a mixture of helium and other gases, mainly nitrogen, with a helium content of 60%-85%, generally around 70%. This mixture is the commodity known as “crude helium” which is sold to the United States by the helex companies, and delivered into government pipeline systems for storage at the Cliffside Field in Texas. The Bureau of Mines pays the helex companies only for the contained helium within this “crude helium” mixture. Thus, the $12.00 mcf price, which is used as a general reference figure of sums received from the Bureau of Mines by the helex companies, is applicable only to the 60%-85% portion of contained helium within the crude helium mixture delivered by the helex companies. Helium can not be extracted from the natural gas stream unless liquid hydrocarbons are first extracted and removed. This is because it is absolutely necessary to remove all moisture content in the gas stream before proceeding to the very low temperatures necessary to extract helium. If these liquids are not removed, they will spray out, solidify and frost deposits will accumulate on heat exchange surfaces, making the helium extraction processes inoperative. All three of the helex plants involved in this litigation extract and sell liquid hydrocarbons in the process of extracting helium, and revenues and profits from sales of these liquid hydrocarbons inure to the benefit of the helex companies or their affiliates. While it is necessary to remove these liquid hydrocarbons temporarily, they may be reintroduced into the gas stream after the helium is extracted. In helium extracting plants operated by the Bureau of Mines, the liquid hydrocarbons are not permanently removed and sold. They are, instead, returned to the natural gas stream after the helium constituent has been, removed. Crude helium is also extracted in a few private plants, and in plants operated by the Bureau of Mines. These plants, however, go one step further in the extracting process, removing the nitrogen content of the crude helium mixture in order to produce an essentially pure helium product which is referred to as “Grade A helium,” which is then distributed and sold to the ultimate consumer. “Grade A” helium has 99.995% to 99.997% helium content. During earlier years, most consumer sales of Grade A helium were in gaseous form. In recent years, Grade A helium is more commonly sold in liquid form. Liquid helium is obtained by further cooling of Grade A helium to temperatures of -453°, 7 degrees above absolute zero, at which point it liquefies. Additional costs are incurred in the process of liquefying, storing, and transporting liquid helium. Immediately prior to the 1960 Helium Act Amendments, the Bureau of Mines was selling Grade A helium for “commercial markets” at $19.00 Mcf, and at $15.50 Mcf’ to governmental agencies. Since the conservation program, Grade A helium has been offered for sale by the government at $35.00 Mcf (the price designed to recover costs of the conservation program), while sales by private plants have ranged from the $35 government price down to $19.00 Mcf by the Kerr McGee plant in Arizona. [LPX 2-25; USX 70.] In 1967 there were some offers to sell Grade A helium for $15.00 per Mcf. [Garwin 3:288-290; Garwin Depo. USX 62, p. 13.] The sale price of Grade A helium in liquid form has ranged from $22 to $23 per Mcf of equivalent gas. [Tr. 1837]. Expert opinions are that due to scarcity of the commodity, the price of Grade A helium will rise to $75 to $100 per Mcf by 1985, with prices thereafter rising astronomically due to depletion of the resource. [Garwin 1:82.] D. Operations at Cities, Northern and National Helex Plants. 1. Northern Helex, Bushton, Kansas. The Bushton plant has three separate facilities: a liquid hydrocarbon extraction plant, completed in 1961; a helium extraction plant, completed in December, 1962; and an ethane extraction plant, which was completed in 1970. Both the liquids extraction plant and the ethane plant are operated by Northern Gas Products Company. The pipeline company, Northern Natural Gas Company owns Northern Gas Products Company. Northern Gas Products Company in turn owns Northern Helex Company. [Wobker 13:1392.] Two gas streams are processed in this plant: one, containing “rich gas”, comes from 1,950 wells located over 38,000 square miles in Southwest Kansas and small parts of Oklahoma. The other, furnishing “lean gas” contains gas from areas other than the Hugoton area. [Wobker 12:1319.] Only the “rich” gas stream in this plant is processed for helium, but both streams are processed for the extraction of liquid hydrocarbons. 2. Cities Service Helex Company, Jayhawk Plant, Ulysses, Kansas. All gas which is fed into this plant is processed for extraction of both liquid hydrocarbons and helium. Any gas which is bypassed around the plant does not get processed for either. [LPX 2-9.] The inlet gas composition at this plant did not vary in any material respect. During years 1964-1972, the helium content of the natural gas stream remained at .42% to .43%. [LPX 2-10; Cities X2.] Some gas is bypassed around the plant and never processed for the extraction of helium. This is because the capacity of the Jayhawk plant is about 500 million cubic feet per day, and gas available from the pipeline may exceed 625 million cubic feet per day. Approximately 75% of the gas feeding into the Cities plant has already been processed once for hydrocarbon content in conventional natural gasoline extraction plants. [Whiteaker 3:311.] Liquid hydrocarbons are recovered in this plant, LPX 2-10, 211 reflecting yields of liquids from the Cities Helex plant. 3. National Helium Plant, Liberal, Kansas. Two different gas streams serve this plant: one, the “Kansas Gas Stream” has a .45% helium content. The other, the “Texas Gas Stream” has a helium content of .40%. Either of these two streams can be bypassed around the extraction plant, but once fed into the plant, they are combined, and treated as one. After the two streams are commingled, they are processed for extraction of both liquid hydrocarbons and helium. [LPX 2-12, 2-13.] In the National plant, after processing, the gas is reconstituted in order that it may leave the helex plant in two separate streams in essentially the same condition as at the inlet points. Prior to construction of the National Helex plant, there was a hydrocarbon extraction plant at Liberal, operated by Century Refining Company, a subsidiary of Panhandle Eastern Pipe Line Company. This extraction plant processed essentially the same gas streams which presently serve the helium extraction plant. National has agreed to deliver for Century’s account, certain amounts of liquid hydrocarbons comparable to those extracted previously by Century. See Garwin 1:116 et seq; Garwin 1:184; Whiteaker 3:310. Approximately 27 % of the gas which is processed in the National Plant comes from wells which are owned by Panhandle Eastern Pipe Line Company. By stipulation, all of the gas which has been processed in the three helex extracting plants just described is “jurisdictional gas.” Jurisdictional natural gas is “gas which is being transported in interstate commerce for resale subject to rate schedules imposed by the Federal Power Commission.” [Garwin 1:140-141.] E. Crude Helium Market. The United States conservation program created a market for crude helium which did not before exist. Between 1961 and March, 1971, the government purchased over 30 billion cubic feet of contained helium in a crude helium mixture for prices ranging from about $10 Mcf to $13 Mcf. The contracts under which these purchases were made were negotiated in 1961, after notice of the program was given to about 370 parties. 292 F.Supp. at 655, 656. Starting in 1966 several private plants began operations in the Hugoton area, making sales to parties other than the government. Witness Harlan testified that the scope of these sales approximated 20% of the crude helium extracted since 1966 by private, non-conservation plants, and that the sales price had been in the range of $12 to $14 Mcf of contained helium. [Tr. 17:1827-1834.] About y2 of the contained helium which moved to the fuel markets as part of the gas stream from the Hugoton gas area in the 1960’s was not processed through any helium extraction plant. [USX 16.] By 1966, the helex conservation plants were producing more crude helium than they could sell to the Bureau of Mines. The United States agreed to store this excess, production in the Cliffside storage reservoir, and stored and returned the following amounts of contained helium during the years indicated: [USX 11, 12]. National Helium Corporation Cities Service Helex Phillips Petroleum Company Northern Helex Company 1966-1973 Mcf 1967-1973 Mcf 1968-1973 Mcf 1971-1972 Mcf In: 302,519 In: 205,061 In: 78,440 In: 877,150 Out: 251,355 Out: 128,039 Out: 21,389 Out: 44,788 Northern has disposed of some surplus crude helium by sale to Kansas Refined Helium at a price of $9.50 Mcf of contained helium in the crude helium mixture. [USX 28, 29; Tr. 2:226-227.] National Helium has sold some surplus to Kansas Refined Helium at a price of 34 cents more than prices paid by the United States. [Tr. 19:2156-2159.] National has also sold about 50 million cubic feet of helium in crude helium to Airco Company at a price of $12.45 Mcf, approximately the price being paid by the United States. [Tr. 19:2158, 2159.] National Helium still has 51 million cubic feet of contained helium in storage at Cliffside and has been unable to dispose of this or of the helium it has extracted since the United States terminated the helium purchase contract it had with National Helium. [Wilson 19:2155-2160.] Northern has tried to sell the helium which it has extracted since the government stopped buying from its Bushton plant, but it has been unsuccessful, [Tr. 2:219-226; 12:1273, NOX 34.] and Northern has been venting helium to the air. At the end of 1973, the United States had 36,529,439 Mcf of conserved helium in underground storage at Cliffside. [USX 10.] None of the crude helium delivered to the United States in connection with the conservation sales contracts has been removed from storage at the Cliffside reservoir. [USX 14, 15, Tr. 2:189, 20:2335, 2336.] None of the conservation helium has been sold to anyone. If and when it is removed from storage at Cliffside, it would have to be purified to get it in a stage comparable to the crude helium state in which it was initially delivered by the Helex plants. This is because it has become mixed with other natural gas native to Cliffside Field. [Tr. 19:2195-97.] If the United States wanted to sell this stored helium today which it has no plans to do, the chance of selling it at a reasonable price in today’s market would not be very good. [Tr. 20:2337-2339.] One practical example of the dilemma faced by the United States in implementing its helium conservation program is illustrated by the fact that if the government buys crude helium for $12.00 per Mcf, and must borrow the money to do so, and then is required to store it for 30 years before it is needed for the consumer market, it would have to sell one Mcf of helium for $300 simply to recover the interest compounded on its initial $12 “investment.” See USX 63, charts on committee hearings, 1969. [USX 14, and Dunn 8:873-876.] USX 13, 14 and 15 graphically illustrate the fact that helium recovery capacity vastly exceeds the demand and consumer market, and that with cancellation of the conservation contracts by the United States, the principal buyer for crude helium has vanished, and the market value of crude helium today, for all practical purposes, is “zero.” F. Termination of Conservation Contracts. In January, 1971, the United States decided to terminate its contracts with the Helex companies, effective March, 1971, due to diminution of demand for helium for government activities, discoveries of new helium reserves, and availability of helium from natural gases of low helium content. [PEX 71; USX 71, 72,17 and 18.] The Federal Helium Conservation Program did not produce the income anticipated by its planners for two principal reasons: government sales of helium at the $35 price were substantially less than expected; and a greater volume of helium was extracted by conservation extractors and by private extractors than had been anticipated. It was found that if conservation contracts were continued, about 69 billion cubic feet of helium would be stockpiled, instead of 43 billion cubic feet anticipated, and that rather than being self-liquidating, as required by the Helium Act, the program would owe the Treasury about $1.5 billion for borrowings and interest. [Lip-per Tr. 20:2301-07; USX 63, USX 67-69.] In connection with the alleged failure of the United States to pay for helium deliveries, Northern in 1970 declared its contract breached, but during the following 18 months, it continued to produce crude helium which it stored at Cliff-side, under a storage agreement with the Bureau of Mines. [Wobker 13:1363.] Since September 28, 1972, Northern has been venting the crude helium gas mixture into the air. There is no market for the stored helium, and it is not economically feasible for a business to produce helium for storage. [Wobker 13:1364-65; Nicholson 12:1272-73.] The termination of contracts with National, Cities and Phillips pursuant to the January 26, 1971 termination notices, to be effective March 28, 1971 [PEX 71] was enjoined by federal court on grounds the Secretary of Interior had not complied with National Environmental Policy Act. National Helium v. Morton (10th Cir.), 455 F.2d 650, D.C., 326 F.Supp. 151. By letters dated February 2, 1973, the Secretary of Interior issued new notices of termination of the contracts to National Helium, Cities Service Helex, and Phillips Petroleum Company, effective April 4, 1973. [PEX 72.] This termination was approved by the Court of Appeals. National Helium Corporation v. Morton (10th Cir., 1973), 486 F.2d 995, cert. den. 416 U.S. 993, 94 S.Ct. 2405, 401 L.Ed.2d 772. The valve through which crude helium was delivered by National Helium Corporation to the Bureau of Mines was turned off on November 12, 1973. [Wilson Tr. 19:2154-55.] On December 24, 1970, Northern Helex filed suit against the United States seeking damages for breach of the conservation contract. On January 21, 1972, the Court of Claims granted Northern Helex summary judgment, holding that the United States had materially breached the contract, by failing to pay for crude helium delivered by Northern and leaving for further determination the amount of recovery. [NOX 36A, 36B, 36C.] Northern Helex Company v. United States (1972), 455 F.2d 546, 197 Ct.Cl. 118. The Court of Claims found that from November 1969 through November, 1970, the government paid nothing at all for helium delivered by Northern. On January 14, 1971, after suit in the Court of Claims was filed, the United States sent Northern Helex a check for $8,671,-631.99, the total amount then due for all helium delivered by Northern. On January 26, 1971, the contract was terminated, effective March 28, 1971. Northern refuses to recognize the legitimacy of termination and has billed the United States for helium delivered through March 31, 1971. On June 23, 1971, Northern received a check for $2,285,872.87 for deliveries December 1970 through March 28, 1971. Northern takes the position that these two payments are in mitigation of damages and not payments for deliveries of crude helium. For some period of time, the United States accepted deliveries of crude helium from Northern Helex, under interim agreements for storage at Cliffside, but when negotiations for a long term storage agreement broke off, the government ceased accepting deliveries on September 28, 1972, and Northern commenced venting helium into the atmosphere. [NOX 36D, 36E, 36F; Wobker, 13:1363-1365; Nicholson 12:1272.] The Court finds that Northern made deliveries of crude helium through the first 27 days of March, 1971, and that deliveries thereafter were stored for Northern’s account. The Court further finds that, for the purpose of Case No. KC-1969, the two payments made by the United States of $8,671,631.99 on January 14, 1971, and of $2,285,872.87 on June 23, 1971 constituted payment for deliveries of crude helium by Northern through March 28, 1971, and that such sums constitute a portion of the Fund which is the subject matter of Case No. KC-1969. G. The Gas Purchase Contracts. Considerable attention was given to the gas purchase contracts existing between the pipeline companies and the lessee-producers in this Court’s prior opinion, 292 F.Supp. at 669 et seq. The contracts in question number approximately 320 in the case of Northern Natural Gas Company, 532, in the case of Panhandle Eastern Pipe Line Company, and approximately 100 in the case of Cities Service Gas Company. These contracts provide that the lessee-producers warrant title to all gas “sold,” “delivered,” or “sold and delivered,” and they indemnify the pipeline purchaser against losses arising out of adverse claims with respect to the gas conveyed. The contracts further provide that in the event of adverse claim to the gas, the pipeline purchaser may retain the purchase price, up to the amount of such adverse claim, without interest, until such adverse claim has been determined. Under most of the contracts the producer sells the gas to the pipeline at the wellhead. As the gas is produced, it passes through wellhead meters and is delivered to the pipeline. In some instances, the producer sells the gas to the pipeline off the leased premises, after gathering to a central point, or after processing through a gasoline plant. In these cases, the volume of gas delivered to the pipeline is measured at such central point, or at the “tail gate” of the gasoline plant. Each of the gas purchase and sales contracts states a unit price per Mcf in money, and lessee-producers are paid on the basis of volume of the entire metered stream of gas at the delivery point, without regard to the individual components of such gas. The contracts commonly include provisions for periodic step escalations in the price' to be paid, frequently stated in terms of cents per Mcf of gas delivered during five year intervals. Some contracts provide for re-negotiation, at stated periods, and if the parties fail to agree on a new price, provisions are made for arbitration. The producers’ sales of gas to the pipelines are sales in interstate commerce of natural gas for resale. The contracts under which such sales are made are filed with the Federal Power Commission under the Natural Gas Act, as amended, 15 U.S.C. § 717 et seq. The pipelines’ payments for gas under such contracts are made at rates established or permitted to be paid by the Commission, expressed in cents per Mcf applied to the delivered volumes of gas. The price paid by the pipeline companies for purchased gas was the FPC ceiling price, or the price recited in the gas purchase contract, whichever was lower, and the price paid was applied to the volume of the entire gas stream. During the period here in question, the prices paid by each of the three pipeline companies involvéd in these interpleader actions, exclusive of prices paid for new supplies after 1970, ranged from a low of approximately 11.5 cents per Mcf to a high of approximately 18.5 cents. From 1962 to 1972, Northern Natural Gas Company bought gas at the following average prices: [NOX 39.] Kansas Oklahoma 1962 13.140 per Mcf 16.850 per Mcf 1963 13.020 15.970 1964 11.450 15.810 1965 11.650 16.200 1966 11.690 16.740 1967 12.160 17.350 1968 12.850 17.240 1969 13.110 17.190 1970 13.170 17.610 1971 14.750 17.750 1972 15.200 18.560 From 1962 to 1972, Northern’s predominant unit costs for new contracts for gas purchases were the following: [NOX 40.] Kansas Oklahoma 1962 16.00 per Mcf 17.00 per Mcf 1963 16.00 17.00 1964 16.00 17.00 1965 16.00 17.00 1966 16.00 17.00 1967 •16.00 17.00 1968 16.00 17.00 1969 16.00 17.00 1970 19.00 17.00-20.00-23.50 1971 19.00 — 24.00 1972 26.5-36.0 20.2- 44.0 The Northern gas purchase contracts are in evidence as NOX 1-15, and summaries of contracts covering 85% of gas purchased by Northern appear as NOX 41-58 and 61-74. Some of Northern’s contracts, as to certain time periods, provide for a price in excess of the ceiling area rate established by the FPC (e. g., NOX 41); some provide for a price equal to such ceiling area rate (e. g., NOX 42); and some provide for a price lower than the area rate (e. g., NOX 63). [Kratky 14:1514-1515.] From 1961 to 1971, Cities Service Gas Company bought gas at the following average prices for wellhead delivery: [Morton 15:1576-1577; Hofsess •17; 1763-1764; Cities X 25.] Kansas Oklahoma Average 1961 12.160 per Mcf 11.500 per Mcf 11.680 per Mcf 1962 11.570 12.140 11.690 1963 13.990 12.350 13.580 1964 14.070 12.190 13.580 1965 14.120 12.110 13.640' 1966 12.910 12.490 12.810 1967 12.930 12.900 12.920 1968 12.920 13.390 13.040 1969 12.790 13.240 12.890 1970 12.81Í 14.22 13.11 1971 18.26 16.26 13.61 Comparable figures for Cities Service field line purchases, 1961-1971 in Kansas and Oklahoma, appear in Cities X 26. Cities Service Gas Company gas purchase contracts appear in evidence as Cities X 20, Parts 1-10. A schedule of contracts where the full contract price was paid is Cities X 19; and a schedule listing contracts where less than contract price was paid appears as Cities X 18. From 1962 to 1972, Panhandle Eastern Pipe Line Company bought gas at the following average prices: [Morton 15:1575.] 1962 13.80 per Mcf 1963 14.30 1964 14.30 1965 14.60 1966 15.10 1967 15.60 1968 15.60 1969 15.90 1970 17.20 1971 17.00 1972 18.60 The average prices for gas specified in new contracts made by Panhandle during 1962-1972 were as follows: [Morton 15:1576.] 1962 16.080 per Mcf 1963 16.450 1964 15.970 1965 16.640 1966 16.670 1967 16.040 1968 17.050 1969 17.010 1970 19.830 1971 22.360 1972 31.10 A list of Panhandle gas supply contracts appears as PEX 1. The actual contracts, appearing as PEX 2, and numbering over 500, were withdrawn by leave of court. [Tr. 18:1975.] Computer printouts PEX 3, give data on all gas delivered to Panhandle; PEX 4, gives data on gas purchases where full contract price was not paid; and PEX 5 are computer runs on gas purchase contracts where full contract price was paid. Approximately one-third, or 27% of the gas stream supplying the National Helex plant via Panhandle Eastern Pipeline came from approximately 580 gas wells owned by Panhandle Eastern, and gas so produced was not subject to any gas purchase contract. For purposes of computing royalties payable to landowners, Panhandle set a value on this gas in the Kansas and Oklahoma Hugoton fields at 11‡ per Mcf from August 1, 1963 to November 1, 1971. These values were raised to 12.50 cents per Mcf in the Kansas Hugoton field, and to 13.25 cents per Mcf in the Oklahoma Hugoton field on November 1, 1971, after suit had been filed on behalf of various landowners. On its own production in the West Panhandle of Texas, Panhandle Eastern paid royalties based on values of 12 cents per Mcf from 8/1/63 to 1/1/65; 13 cents from 1/1/65 to 11/1/71; and 13.50 cents from November 1, 1971 to January 1, 1972. [PEX 6; Dixon 19:2075, 2090; Wiedenheft 18:1988-2000.] Another large portion of gas carried by the Panhandle pipeline system was acquired by Panhandle from producers and other pipeline companies under 22 gas exchange contracts involving the exchange of gas for gas [PEX 2, Contracts numbered 9001 through 9022; Dobbs 18:2028, 2035-2036, 2045-2047.] No money changed hands on these gas exchange contracts. No price per Mcf was attached to or placed on gas exchange between the parties, and these agreements appear to have been made for the convenience and mutual benefit of the parties. A typical exchange contract provides that: [PEX 2, Contract No. 9004, pp. 4, 5; 9008, f[ 8.] . possession of and title to all gas exchanged * * * shall pass to the receiving party at the point of delivery, and arrangement under the contract shall be limited to the exchange of gas and shall not be considered or held to be a sale, and no price shall be placed on the gas received. With respect to gas balancing, the exchange contracts typically stated that it was understood that the exchange of gas was for the mutual benefit of the parties and was made with no thought whatever of the profit or loss that would ordinarily attend a sale or purchase of gas and no price per Mcf was attached to any of the gas exchanged between parties. [Dobbs 18:2034-2036; PEX 2, Contract 9008, ¶ 8; PEX 2, Contracts 9001-9022.] Many of the points of exchange are long distances from each other and many are for transportation convenience of the parties. Part of the exchanges cover gas from a particular well, or wells, and part is from pipelines. Sometimes wellhead gas is exchanged for pipeline gas. Dobbs 18:2029, 2045; PEX 34 summarizes gas exchange contracts, and PEX 35-56 consist of maps indicating points of delivery and re-delivery of gas under each specific exchange contract. None of the 22 gas exchange contracts implemented by Panhandle contains any provision for adjustment of volumes in exchange by reason of the helium constituent, either in the gas delivered, or in the gas received. [Dobbs 18:2040, 2045-2047.] H. Processing Agreements Between Helex Companies, and Pipe Line Companies. The gas supply for the Northern Helex Plant at Bushton is obtained by contract with Northern Natural Gas Company ; the gas supply for Cities Helex is obtained from Cities Service Gas Company; and the supply for the National Helium Plant at Liberal, is obtained by contract with Panhandle Eastern Pipe Line Company. After the gas was delivered by Lessee-Producers to the pipelines at prices ranging from approximately 11.5 cents to 18.5 cents per Mcf, as discussed supra, it was then conveyed by the pipeline companies to the helium extraction plants for processing before continuing on to ultimate fuel consumers. On its way to the Helex plants, some of the gas was sold “off the line” to consumers or other pipeline companies; some was consumed as fuel in the pipeline compressor stations, etc., and some of the gas was completely bypassed around the extracting plants. The gas which was delivered to the Helex plants was subject to certain “processing agreements,” whereby the Helex companies made various payments to the pipeline companies for the right to extract helium and hydrocarbons. The National Helium-Panhandle Eastern Agreement, dated October 2, 1961 [LPX 2-79], covering a gas stream with .40% helium content, granted the right to extract helium, helium-gas mixtures, nitrogen, and certain liquid hydrocarbons, other than methane. For this privilege, National paid Panhandle Eastern a base price of 35^ per Mcf for “shrinkage,” plus a base price of $2.06 per Mcf for all volumes of contained helium extracted by National. The $2.06 base figure for helium was subject to escalation according to the wholesale price index, and this fee ranged from $2.05 in 1963 to $2.36 in 1971, and averaged $2.-16. [PEX 113, Schedule 1; Lawson 21:2429.] The Cities Helex — Cities Service Gas Company Agreement, dated August 18, 1961, contemplates delivery of a gas stream of .47% helium. [LPX 2-64, 2-65] The Cities Service arrangements provide for a processing fee of 1.35 cents for each Mcf of natural gas delivered to the Helex plant, subject to adjustment for helium content of the gas stream above and below .47% helium content. [LPX 2-65, “Processing contract,” [f 5(a)] The figure of 1.35 cents per Mcf, as applied to the whole gas stream, is equivalent to $3.00 per Mcf for contained helium which is extracted from that stream. [Garwin 3:298] The Northern Helex — Northern Natural Gas Agreement, dated July 28, 1961 [LPX 2-61], contemplates delivery of gas containing .46% helium, and provided for payment of 28 cents per Mcf for volumes of helium gas extracted. Northern Helex also agreed to pay to Northern Natural Gas, all payments which the pipeline company might be required to pay to third parties for their interest in the helium extracted. The extraction of liquid hydrocarbons, which was a separate operation run by an affiliated company, Northern Gas Products Company, was the subject of separate contracts. A 20-year liquid hydrocarbon extraction agreement between Northern Natural Gas and Northern Gas Products [NOX 24, as amended NOX 24B, 24A] provided a right to extract liquid hydrocarbons for payment by Northern Gas Products of 46 cents per Mcf for “shrinkage,” with Northern Products obliged to redeliver gas equivalent in heating value to 975 BTU. By amendment of June 26, 1967 [NOX 24B] the right to extract ethane was added, for a payment of 26 cents per Mcf for volumes of gas used in extraction of ethane alone. Actual payments for these liquid extractions were made under a formula provided by contract. [NOX 24A] I. Contentions of the Parties — “Reasonable Value”. The Court permitted the parties to explore the question of “reasonable value” in terms of its widest scope and ramifications. As a result of this, the Court has before it evidence that the “reasonable value” of commingled helium in the natural gas stream ranges from a “negative value” of several dollars [PEX 118] ; that its value is “zero”; that its value is the agreed volumetric prices set out in gas purchase contracts, as regulated or not regulated by the FPC, in any event, not more than 15 to 20 cents per Mcf of helium; and that its “reasonable value,” according to evidence offered by lessee-producers and landowners, ranges from $2.74 to $15.79 per Mcf of helium extracted at the Cities Helex plant; from $7.77 to $12.64 per Mcf for helium extracted at the Northern Helex plant; and from $12.74 to $16.20 per Mcf for extracted helium at the National Helium plant. This rather surprising gulf between the parties’ notions of “reasonable value” stems of course from further exhaustive evidence organized and offered by all opposing sides, in support of their respective versions of “the refreshing authority found in the folk-tale of the Little Red Hen,” thoughtfully noted by the Court of Appeals, 441 F.2d 704, at 721. In the search for “reasonable value” this Court has received evidence touching upon the value of helium in its various states, as it appears in “helium bearing natural gas,” “contained helium,” “crude helium” and “Grade A helium." Helex Ex. 316, 328 graphically illustrates the fact that it is most necessary to carefully consider the “market place” in which one references “value.” These “market places” include: 1. The sale of helium bearing natural gas by the lessee producers to the pipeline companies: As noted, these sales ranged from approximately 11.5 cents to 18.5 cents per Mcf. The Court of Appeals has ruled that these payments did not include payment for the helium constituent. 2. The sale of helium bearing natural gas by the pipeline companies to ultimate fuel consumers. In such instance, the contained helium has no value because it is vented into the atmosphere. 3. The “sale” of contained helium by the pipeline companies to helium extracting plants through “processing agreements,” wherein payment is made for “shrinkage,” and/or a fee is charged based upon volumes of contained helium extracted, such fees generally ranging from $2.00 to $3.00; 4. The “sale” of liquid hydrocarbons which may be extracted as a “by product” or “joint product” of the helium extracting processes; 5. The sale of crude helium to the United States Government by the Helex companies, under the conservation contracts at the approximate price of $12.00 per Mcf for contained helium; 6. The sale of crude helium to private helium plants producing Grade A helium, at prices of approximately $12.-00 to $9.50 per Mcf for contained helium; 7. The sale of Grade A helium by Bureau of Mines plants at a price of $35.00 per Mcf; 8. The sale of Grade A helium by private plants at prices ranging from $19.00 to $35.00 per Mcf; and 9. Future sales of helium stored in the Cliffside Field in the year 2,000 with evidence of value at that point ranging from $75 to $100 per Mcf up to unknown values. With these “markets” in mind, and in arriving at its ultimate conclusion as to value, the Court has considered evidence provided in the gas purchase and gas exchange contracts between the pipeline companies involved in these interpleader actions and their suppliers; gas purchase contracts between other parties which involved sales of “helium bearing natural gas;” gas purchase contracts by intrastate purchasers which were not subject to FPC rate regulation; various arrangements made by the United States for gas supplies in the operation of government helium extraction plants; the processing agreements made between the Helex companies and their pipeline suppliers; and arrangements and payments made by “private” helium extracting companies which were not involved in the conservation program. In addition to such contractual evidence, the Court has also fully considered evidence produced by all parties concerning “costs” of extracting helium, appropriate rates of return to both the Helex companies and lessee-producers, as well as the opinions of numerous experts who testified as to their opinion of the reasonable value of contained helium at the wellhead. Before discussing such evidence in greater detail, the Court will attempt to summarize the contentions of the parties concerning “value.” Lessee-Producers and Landowners Briefly stated, the sole theory of value offered by Lessee-Producers and their co-parties in interest, the Landowners, was based upon the premise that there were no comparable sales of commingled helium at the wellhead by which value could be ascertained, and that therefore, the proper method to arrive at value was to use a “proceeds less expense” approach to the question, so as to “work down” to a proper figure. In applying this theory, the Lessee-Producers urge that the first free, open, competitive market for helium is that of sales of Grade A helium, the state in which helium is bought by and sold to, the ultimate consumer. Thus, the Lessee-Producers start their “work down” approach, not with the actual proceeds received by the Helex companies from sales of conservation helium to the Bureau of Mines, which was approximately $12.00 per Mcf for contained helium in the crude helium mixture, but rather with a figure of $20.00 per Mcf which they represent to be a conservative, average estimate of the “market value” of Grade A helium sold to ultimate consumers during the years 1963-1971. From this figure of $20, the Lessee-Producers would deduct the “cost of purification” of crude helium into Grade A helium, estimated to be $2.00 per Mcf, and then subtract “costs of extraction” to arrive at a final value for the helium content of the gas stream processed in each individual helex plant for each of the several years. The “costs of extraction,” [LPX 2-19] were computed by taking operating expenses from company records (with certain adjustments believed to be required by Lessee-Producers’ experts), adding on a figure which the producers considered to be a “fair rate of return” on the helex companies’ investments,” and then deducting from these expenses a figure determined to be a “by-product liquids credit,” which was arrived at by computations concerning profits realized by the Helex companies from their liquid hydrocarbon extraction operations, which were carried on in conjunction with helium extracting activities. The results of these various, elaborate computations produced widely varying “values” within each Helex plant, and from year to year, such variations of course, resulting from comparative efficiencies and costs within each plant, and, depending in part, upon profits made from extraction of liquid hydrocarbons. Ultimate values, according to Lessee-Producers are set out in LPX 2-24, as explained by Dunn: 6:592 etseq.: COMMINGLED HELIUM EXTRACTED BY CITIES SERVICE HELEX, INC. 1963-1971 1963 1964 1965 1966 1967 1968 1969 1970 1971 Minimum market Value of Grade A Refined Helium $20.00 $20.00 $20.00 $20.00 $20.00 $20.00 $20.00 $20.00 $20.00 Cost of Purification of Helium Gas Mixture (crude helium) $ 2.00 $ 2.00 $ 2.00 $ 2.00 $ 2.00 $ 2.00 $ 2.00 $ 2.00 $ 2.00 Cost of Extraction by Helex Company $15.26 $ 6.61 $ 4.96 $ 3.74 $ 2.21 $ 4.17 $ 5.38 $ 3.85 $ 4.15 Value of Commingled helium at Lessee-Producer delivery point $ 2.74 $11.39 $13.04 $14.26 $15.79 $13.83 $12.62 $14.15 $13.85 COMMINGLED HELIUM EXTRACTED BY NORTHERN HELEX COMPANY 1963-1971 1963 1964 1965 1966 1967 1968 1969 1970 1971 Minimum Market Value of Grade A Refined Helium $20.00 $20.00 $20.00 $20.00 $20.00 $20.00 $20.00 $20.00 $20.00 Cost of Purification of Helium Gas Mixture (crude helium) $ 2.00 $ 2.00 $ 2.00 $2.00 $ 2.00 $ 2.00 $ 2.00 $ 2.00 $ 2.00 Cost of Extraction by Helex Company $10.23 $ 5.49 $ 5.79 $ 5.89 $ 5.36 $ 5.68 $ 5.39 5.40 $5.39 Value of Commingled Helium at Lessee-Producer delivery point $ 7.77 $12.51 $12.21 $12.11 $12.64 $12.32 $12.61 $12.60 $12.61 COMMINGLED HELIUM EXTRACTED BY NATIONAL HELIUM CORPORATION 1963-1971 1963 1964 1965 1966 1967 1968 1969 1970 1971 Minimum Market Value of Grade A Refined Helium $20.00 $20.00 $20.00 $20.00 $20.00 $20.00 $20.00 $20.00 $20.00 Cost of Purification of Helium Gas Mixture (crude helium) $ 2.00 $ 2.00 $ 2.00 $ 2.00 $ 2.00 $ 2.00 $ 2.00 $ 2.00 $ 2.00 Cost of Extraction by Helex Company $ 5.26 $ 5.26 $ 3.90 $ 2.51 $ 1.80 $ 3.17 $ 3.63 $ 3.74 $ 3.60 Value of Commingled Helium at Lessee-Producer delivery point $12.74 $12.74 $14.10 $15.49 $16.20 $14.83 $14.37 $14.26 $14.40 When the above values are converted into cents, per Mcf for the whole stream of natural gas delivered from the wellhead, the result is approximately 3.5 cents per Mcf for natural gas delivered into the Northern plant, 4.0 cents per Mcf for natural gas delivered into the Cities Service Helex plant, and 4.5 cents per Mcf for natural gas volumes delivered into the National Helium plant. [LPX 2-100] The Lessee-Producers’ approach to valuation of the helium content of helium bearing natural gas was successfully urged by the producer in Ashland Oil, Inc. v. Phillips Petroleum Co. (N.D.Okl. 1973), 364 F.Supp. 6, appeal pending, a suit which involved the Phillips’ Helex plants in Texas. In that instance, where the Phillips’ plant was selling crude helium to the Bureau of Mines at a base price of $10.30 per Mcf, the Court found minimum values of contained helium to be within a range of $14.19 per Mcf to $16.45 per Mcf for gas processed at the Phillips’ Sherman plant, and within the range of $12.07 per Mcf and $13.19 per Mcf for gas processed at the Dumas, Texas plant. Helex Companies The Helex companies have not abandoned their contention, rejected by the Court of Appeals, that the FPC has jurisdiction over the commingled helium delivered at the wellhead, pursuant to the gas sales contracts. Since the Court of Appeals has ruled definitively on that issue, no further discussion need be had concerning the merits of this position. The Helex companies further contend that the helium contained in the natural gas stream, at the times and places of sale by the Lessee-Producers to the pipelines, had no economic value except as a part of the total volume of gas sold, and accordingly, the “reasonable value” of such helium is the unit price expressly agreed upon by the parties in the gas sales contracts, whether that price be 60, 100, 120 or 160 and that such agreed price should, in each instance, be applied against the volumes of helium contained in the gas sold by the Lessee-Producers which was subsequently processed for helium extraction and sold to the United States. [See Tr. 19:2094] In the absence of “an agreed reasonable value” by the parties to the gas purchase contracts, the Helex companies contend that considering evidence of comparable sales of helium bearing natural gas in the Hugoton area, and considering supplies available, the value of helium during the period of 1961 to 1971 ranged from 150 to 200 per Mcf, and in no event exceeded the sum of 250 per Mcf, which represents the Lessee-Producers’ average costs of producing helium bearing natural gas. These figures were supported by expert opinions by Max Arnold, a professional appraiser, who analyzed numerous interstate and intrastate gas sales contracts, in relation to supplies and demand for helium bearing natural gas; [Helex X 316, 328, Tr. 21:2522] Sherman Clark, [Tr. 10:1096, 11:1120; 1143-1144, Helex X 309] an expert in economics, who analyzed value in relation to supply and demand, and concluded that the value ranged from 15 to 20 cents per Mcf for contained helium; and Dr. Walter Morton, an expert in the fields of rate return and economics. [Tr. 15:1566-1577] Dr. Morton analyzed value in terms of cost to the Lessee-Producers in producing the contained helium. In other words, a type of “work-up” method by which he concluded that the producers should be entitled to their cost of production for each Mcf of contained helium, plus a “fair rate of return” of about 16% on their investment. Using this approach, Dr. Morton concluded that the reasonable value of contained helium at the wellhead for years 1961-1972 ranged from 25 cents to 45 cents per Mcf for contained helium. J. Indicators of Value. The Helex Companies and the United States urge that ample market data exists concerning “comparable sales,” from which a determination of reasonable value can be made without resort to the proceeds-less-expense theory relied upon by Lessee-Producers. Evidence concerning such comparable transactions may be summarized as follows : VALUE OF HELIUM PRIVATE EXTRACTING PLANTS— HUGOTON AREA Since the 1960 Helium Act Amendments, three private extraction plants operating in the Hugoton area have supplied significant quantities of Grade A helium to commercial markets — the Kansas Refined Helium Company, Otis, Kansas, processing gas with approximate helium content of 1.30% ; the Alamo Chemical Plant at Elkhart, Kansas, processing gas of approximately .59% helium content; and the Sunflower Plant, at Scott City, Kansas, owned by Cities Service Cryogenics, Inc., and Helium, Inc., a subsidiary of Kansas-Nebraska Pipeline Company, processing gas containing approximately .50% helium. Kansas Refined Helium Plant, Otis, Kansas Gas processed through the Otis Plant comes from three different sources. [Tr. 1:76, 77] 1) Leasehold gas which the owner, George Angle, procured from his own gas wells drilled under the name of Frontier Oil Company; [USX 26, p. 105; Lippert v. Angle (1973) 211 Kan. 695, 508 P.2d 920] 2) gas purchased in 1968 from Kansas-Nebraska Natural Gas Company; [USX 27] 3) crude helium purchased from other extraction plants. [USX 28, 29; Tr. 13:1365; 19:2156-60.] In Lippert v. Angle (1973), 211 Kan. 695, 508 P.2d 920, the Kansas Supreme Court determined that the actual “market value” at the wellhead of gas produced by Angle from the Reichel field in Rush County, Kansas was 13 cents per Mcf less certain BTU adjustments and cost of compression, from date of first production to February 1, 1967, and thereafter was 14 cents per Mcf. Angle’s leases were secured during the 1960’s in order to develop helium bearing gas reserves in sufficient quantities to support his liquid helium plant. Gas wells in the Reichel field had previously been connected to the Kansas-Nebraska pipeline gathering system, and gas had been processed for helium extraction by the United States in a plant operated by the government at Otis, Kansas from 1945 to 1968. More than 340 of Angle’s