Citations
- 942 F.2d 765
Full opinion text
JOHN P. MOORE, Circuit Judge.
In this case, we turn our attention to issues not addressed in a prior opinion in which we dismissed the action on jurisdictional grounds. McMoran Oil and Gas Co. v. KN Energy, Inc., 907 F.2d 1022 (10th Cir.1990), rev’d, — U.S. -, 111 S.Ct. 858, 112 L.Ed.2d 951 (1991). On the merits, McMoran Oil and Gas Company and its parent company, FreePort-McMoRan, Inc., (McMoRan collectively) and KN Energy, Inc., (KN or Buyer) now challenge the district court’s interpretation of an amendment to the parties’ gas purchase contract. KN raises additional evidentiary errors. We reverse and remand in part and affirm in part.
I. Background
In 1973, to insure against shortages in its supply of natural gas, KN, an interstate pipeline company, executed a gas purchase contract (the 1973 Contract) with a predecessor of McMoRan in which the producer agreed to develop 475,000 acres of a gas field in the Bowdoin Unit, Phillips and Valley Counties, Montana, and to dedicate that production exclusively to KN for the life of the field. The 1973 Contract established a price of 50$ per thousand cubic feet (MCF) to be increased at the end of each succeeding contract year by 1$/MCF.
In 1975, the 1973 Contract was amended (the 1975 Amendment). In exchange for adding 123,000 acres to the originally dedicated field, McMoRan acquired the right to request renegotiation of the purchase price if Congress deregulated natural gas. (Exh. 2). In addition, 118.1F of the 1975 Amendment permitted McMoRan to request renegotiation every three years after the first renegotiated price became effective. During the interim three years of each renegotiation period, the price “shall increase one (lit) per thousand (1,000) cubic feet until the effective date of each subsequent redetermined price.”
Later, as a consequence of the newly enacted Natural Gas Policy Act of 1978 (NGPA), 15 U.S.C. §§ 3301-8432, and the substantially changed relationship between McMoRan and KN, KN notified McMoRan that upon deregulation, it would pay 62c/ MCF, although it had previously paid a higher price for the same production. McMoRan responded by demanding the proper price be paid and later notified KN it would exercise its right to renegotiate the price as provided in ¶ 8.1F of the 1975 Amendment. According to McMoRan, the highest price “then being paid” for natural gas in the Bowdoin Area was the NGPA maximum lawful price for § 108 gas “as determined from month-to-month based upon inflation and real growth factors and including tax reimbursement.” (Exh. 28). KN later responded under ¶ 8. IF, the “highest price” referred to the February 1985 “highest deregulated price” under § 103(b)(1) of the NGPA or $2.96/MCF.
This diversity action for breach of contract followed. McMoRan sought declaratory relief to determine the appropriate renegotiated price under ¶ 8. IF and damages for past underpayments. After a two-day trial, the district court ruled from the bench that the “ ‘highest price’ means highest price and that ‘highest price being paid for interstate or intrastate sold — similar quantities and qualities and being sold under similar terms and conditions: does not distinguish between regulated gas and unregulated gas.” (R. VI, 9). The court found “the highest price then being paid was the regulated February, 1985 price,” id. at 11, or $4.16.6/MMBTU, subject to an annual increase of l