# Appendix — Southern Union Co. v. Jicarilla Apache Tribe > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385018_2321%3A2 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1986 - **Citation:** 479 U.S. 970 ## Text Supreme Court, U.&. 2 ie D No. A-1010 yA) on SPR C NCES oN ae b BrY-y 8 6- IN THE Supreme Court of the Unite OCTOBER TERM, 1986 SOUTHERN UNION COMPANY, UNICON PRODUCING COMPANY, SOUTHLAND ROYALTY COMPANY and EXXON CORPORATION, V. Petitioners, JICARILLA APACHE TRIBE, DONALD P. HODEL, Secretary of the United States Department of the Interior and STATE OF NEW MEXxIco, Respondents. PETITIONERS’ JOINT APPENDIX TO PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT SETH D. MONTGOMERY * MARK F. SHERIDAN ANNE B. HEMENWAY MONTGOMERY & ANDREWS, P.A. Post Office Box 2307 Santa Fe, New Mexico 87504-2307 (505) 982-3873 Counsel for Petitioner Southern Union Company BRUCE D. BLACK * CAMPBELL & BLACK, P.A. Post Office Box 2208 Santa Fe, New Mexico 87501 (605) 988-4421 Counsel for Petitioner Unicon Producing Company * Counsel of Record JOHN R. COONEY * LYNN H. SLADE WALTER E. STERN, III MODRALL, SPERLING, ROEHL, HARRIS & SISK, P.A. Post Office Box 2168 Albuquerque, New Mexico 87103 (505) 848-1800 Counsel for Petitioner Southland Royalty Company HAROLD L. HENSLEY, JR.* HINKLE, Cox, EATON, COFFIELD & HENSLEY Post Office Box 10 Roswell, New Mexico 88201 (505) 622-6510 FRANK G. HARMON * BAKER & BorTTs One Shell Plaza Houston, Texas 77002 (718) 229-1234 Counsel for Petitioner Exxon Corporation WILSON - Epes PRINTING Co., INC. - 789-0096 - WASHINGTON, D.C. 20001 JOSEFH F. SPANIOL, JR. , Statice TABLE OF CONTENTS APPENDIX A Page Opinion of the United States Court of Appeals for the Tenth Circuit on Rehearing En Banc, filed SE Te e. Hardin Dhthcincnclnsdeiadtenian la Opinion of the United States Court of Appeals for the Tenth Circuit Denying Petitions for Rehearing En Banc, filed April 15, 1986 -.......2.22..22000. 0. 15a Opinion of the United States Court of Appeals for the Tenth Circuit Denying Motion to Modify En Banc Opinion and Supplementing En Banc Opin- ion, filed June 18, 1986 ............................ GO ADI HR 18a APPENDIX B Opinion of the United States Court of Appeals for the Tenth Circuit, filed February 24, 1984 ............. 21la APPENDIX C Opinion of the United States District Court for the District of New Mexico on Cross Motions for Partial Summary Judgment, filed September 7, } PRE Cie ome ree eek ne OWNS HSE! fame nena 66a Order of the United States District Court for the District of New Mexico on Cross Motions for Par- tial Summary Judgment, filed September 7, 1978.. 73a APPENDIX D Opinion and Order of the United States District Court for the District of New Mexico Denying Plaintiff’s Motion to Reconsider Partial Summary Judgment, filed December 19, 1978 ........00000.0200200.. 75a APPENDIX E Opinion of the United States District Court for the District of New Mexico, Denying Defendants’ Motions te Dismiss Plaintiff’s Second Amended Complaint, filed April 13, 1979 0000. 79a ii TABLE OF CONTENTS-—-Continued Page Order of the United States District Court for the District of New Mexico Denying Defendants’ Mo- tions to Dismiss Plaintiff’s Second Amended Com- mateek, Ged BGT 1B, BOTD naan nneneenennencenntncesesonscins 102a APPENDIX F Opinion of the United States District Court for the District of New Mexico Following Tria} on the Merits, filed November 5, 1979 ...................-------------- 104a Order of the United States District Court for the District of New Mexico Following Trial on the Merits, filed November 5, 1979 ...................--.----------- 138a APPENDIX G Opinion and Order of the United States District Court for the District of New Mexico Pertaining to Accounting of Royalties on Oil and Gas Leases, Ge Dem TR, FI inns nner nen 14la Order of the United States District Court for the District of New Mexico on Motions to Reconsider July 30, 1980 Opinion and Order, filed January 26, DEE incutdttssieecsesacasnontcinnincestbiensioincntenianiiuaanmmanadmnind 154a APPENDIX H Opinion of the United States District Court for the District of New Mexico on Cross-Claims of South- land Royalty Company, Supron Energy Corpora- tion and Exxon Corporation Against Gas Company of New Mexico, filed June 1, 1981 .............2.2.0022..... 165a Order of the United States District Court for the District of New Mexico on Cross-Claims of South- land Royalty Company, Supron Energy Corpora- tion and Exxon Corporation Against Gas Company of New Mexico, filed June 1, 1981 ___......2222o... 173a iii TABLE OF CONTENTS—Continued Order of the United States District Court for the District of New Mexico Amending Order of June 1, ff ee APPENDIX I Opinion of the United States Department of the Interior, Interior Board of Land Appeals, On Con- solidated Appeals From Decisions of the Acting Deputy Commissioner for Indian Affairs, Pertain- ing to Royalty Values, decided March 21, 1980... APPENDIX J 25 U.S.C.A. §§ 396a-396g (1983), Indian Mineral LR eee S. Rep. No. 985, 75th Cong., 1st Sess. (1937) _....... H.R. Rep. No. 1872, 75th Cong., 3d Sess. (1938) .... APPENDIX K 25 C.F.R. §§ 211.1-211.30 (1985) (formerly codi- fied at 24 C.F.R. § 171 (1981) ) 00. 30 C.F.R. §§ 221.1-221.80 (1981) Redesignation Table Showing Relationship of For- mer 30 C.F.R. Part 221 (1981) to Current 30 C.F.R. Parts 202 to 206 (1985) Redesignation Table Showing Relationship of For- mer 30 C.F.R. Part 221 (1981) to Current 43 C.F.R. Parts 3160-3165 (1985) _.............................. 30 C.F.R. §§ 206-100-206.107 (1985) 0. 43 C.F.R. §§ 3160.0-1-3160.0-5 (1985) 000. 43 C.F.R. §§ 3161.1-3161.3 (1985) 43 C.F.R. §§ 3162.1-3162.8 (1985) 0. 43 C.F.R. §§ 3163.1-3163.6 (1985) 000. 43 C.F.R. §§ 3164.1-3164.4 (1985) SO eee meme wwe n new anaeaeenae Page 175a 176a 200a 204a 209a 214a 238a 279a iv TABLE OF CONTENTS—Continued Page 43 C.F.R. §§ 3165.1-3165.4 (1985) -...............-..------- 338a 51 Fed. Reg. 4507 (1986) (Notice of Proposed Rules, February 5, 1986) ..................-.......----.---c0-- a 3 . a 65a oil or gas-bearing strata; not to drill any well within 200 feet of any house or barn now on the premises without the lessor’s written consent; to carry out at the expense of the lessee all reasonable orders and requirements of the oil and gas supervisor rela- tive to prevention of waste, and preservation of the property and the health and safety of workmen; to bury all pipe lines crossing tillable lands below plow depth unless other arrangements therefor are made with the superintendent; to pay the lessor all dam- ages to crops, buildings, and other improvements of the lessor occasioned by the lessee’s operations; Pro- vided, That the lessee shall not be held responsible for delays or casualties occasioned by causes beyond the lessee’s control.” Rec., jt. app. vol. I, at 13-15. 66a APPENDIX C IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW MEXICO No. 75-247-M Civil JICARILLA APACHE TRIBE, Plaintiff, v. SOUTHERN UNION GAS COMPANY, et al., Defendants. [Filed Sept. 7, 1978] MEMORANDUM OPINION This matter came up on cross motions for partial sum- mary judgment by the plaintiff and all remaining de- fendants, and having considered said motions, and the memoranda of counsel, affidavits, depositions and ex- hibits, the following opinion will dispose of the points raised by the parties. POINT I Plaintiff alleges that the defendants have not calcu- lated royalties on the “value” of natural gas, oil and liquid hydrocarbon substances as required by the leases involved herein. I conclude, however, that as a matter of law the “value” was determined by the Secretary of the Interior (Secretary), and that retroactive reassess- ment of the value is improper. The defendants’ motions for partial summary judgment as to this issue should 67a be granted, as all parties agree and I find that there is no issue of material fact, which would necessitate a trial on this issue. The essence of plaintiff’s claim is that the Secretary did not determine “value” prior to the institution of this lawsuit as that term is defined in the leases and that this Court should determine “value” after an evidentiary hearing or order the Secretary to do so. The Secretary has in fact already determined “value” for royalty pur- poses in accordance with the terms of the leases and regulations, and the plaintiff disagrees with this deter- mination. The leases are Standard Form 157 Department of In- terior lease forms, paragraph 3(c) of which defines the term “value”: During the period of supervision, “‘value”’ for the purposes hereof may, in the discretion of the Secre- tary, be calculated on the basis of the highest price paid or offered (whether calculated on the basis of short or actual volume) at the time of production for the major portion of the oil of the same gravity, and gas, and/or natural gasoline, and/or all other hydrocarbon substances produced and sold from the field where the leased lands are situated, and the actual volume of the marketable product less the con- tent of foreign substances as determined by the oil and gas supervisor. The actual amount realized by the lessee from the sale of said products may, in the discretion of the Secretary, be deemed mere evidence of or conclusive evidence of such value. Certain provisions of 30 CFR are made applicable by the leases to the determination of value on which royal- ties are based. 30 CFR 221.47 provides: The value of production, for the purpose of comput- ing royalty shall be the estimated reasonable value of the product as determined by the Supervisor, due 68a consideration being given to the highest price paid for a part or for a majority of production of like quality in the same field, to the price received by the lessee, to posted prices and to other relevant matters. Under no circumstances shali the value of produc- tion of any of said substances for the purposes of computing royalty be deemed to be less than the gross proceeds accruing to the lessee from the sale thereof or less than the value computed on such reasonable unit value as shall have been determined by the Secretary. In the absence of good reason to the contrary, value computed on the basis of highest price per barrel, thousand cubic feet, or gallon paid or offered at the time of production in a fair and open market for the major portion of like-quality oil, gas, or other products produced and sold from the field or area where the leased lands are situated will be considered to be reasonable value. Royalties have been paid by all defendants based upon a determination and billing by the Secretary. The defend- ants filed regular monthly Statements of Oil and Gas Runs and Royalties on each of the leases. The value for royalty purposes shown in these monthly statements were the sales prices received by defendants at the wellhead. The Secretary, through the United States Geological Sur- vey (USGS) issued monthly billings of royalties to the defendants based upon these wellhead sales prices re- ceived by the defendants. This was an exercise of the Secretary’s discretion based upon the regulations and the leases, whereby he conclusively established value for royalty purposes as the sale price received at the well- head. The rendition of these statements and billings by the USGS constitutes an official act of the Secretary. 25 CFR 171.13. This determination by the Secretary may be chal- lenged in an administrative appeal, and this court would then be able to review the agency action under 5 USC 69a 706. However, the plaintiff did not exhaust this ad- ministrative remedy, and failed to provide the Secretary with “good reason” to compute “value” differently. In addition, the plaintiff has failed to allege any arbitrary, capricious or unlawful actions, or abuse of discretion by the Secretary. In Continental Oil Co. v. United States, 184 F.2d 802 (Tenth Cir. 1950), the court specifically held that deter- minations of value for royalty payments could not be applied retrospectively to recompute gas royalties. I con- clude therefore, that plaintiff’s request that this Court redetermine the “value” for royalty purposes for years past, where billings have been made and royalties have been paid, would be improper. Point II The plaintiff alleges that the leases involved herein require the defendants to account for liquid hydrocarbon substances in the natural gas stream by both the net realization method and the BTU adjustment method, and that royalties should be paid on the basis of whichever accounting method creates the greater revenue. In De- cember, 1976, the Secretary of the Interior directed Southern Union Gas Company to make a duel account- ing for plaintiff’s liquid hydrocarbon substances, as plain- tiff has requested herein; the Secretary’s decision is being appealed, and the determination upon appeal may well dispose of this issue, subject to possible review here. I therefore conclude that a ruling here on this issue should be deferred until such time as the appeal is complete, unless it appears that the disposition upon appeal has been unreasonably delayed. POINT III The plaintiff asserts that there is no genuine issue of material fact and that as a matter of law it is entitled to have the cost of manufacture allowance, which has 70a been determined by the Secretary, implemented and used in accounting for liquids by the net realization method of accounting. The resolution of this issue, however, is necessarily contingent upon the determination of Point II above, which has been reserved until the conclusion of the appeal process. Ruling on this issue will therefore be deferred until such time as Point II is again before this court for adjudication. Point IV The plaintiff has requested partial summary judgment granting the relief prayed for in paragraphs 2, 4, and 5 of the prayer for relief of the Fourth Cause of Action of the Amended Complaint. As to the claim for dual accounting for liquids, this issue has been deferred until the appeal process is complete (see Point II above). On the issue of the value of natural gas, oil and liquids for royalty purposes, the plaintiff’s motion for summary judgment should be denied and the defendants’ motions granted on the basis of the law set forth in Point I above. The plaintiff has further alleged that the defendants are required by the leases to drill offset wells or alterna- tively that defendants’ rights in the spacing units of each case where offset wells should have been drilled be cancelled. In addition, the plaintiff alleges that the defendants must, as a matter of law, explore and develop plaintiff’s lands to the fullest extent possible, or suffer cancellation of their leases as to any undeveloped geo- logical formations. Paragraph 3(b) of the leases requires the defendants to: drill and produce all wells necessary to offset or pro- tect the leased lands from drainage [by wells on ad- joining lands not the property of the lessor] or in lieu thereof, to compensate the lessor in full each month for the estimated loss of royalty through drainage . . . if the lessee elects not to drill and Tla produce such other wells for any period the Secre- tary of the Interior may, within 10 days after due notice in writing, either require the drilling and production of such wells to the number necessary, in his opinion, to insure reasonable diligence in the de- velopment of the property, or may, in lieu of such additional diligent drilling and production, require the payment on and after the first anniversary date of this lease of not to exceed $1 per acre per annum, which sum shall be in addition to any rental or royalty hereinafter specified. It is not clear whether the bracketed language appears in paragraph 3(b) of the leases involved herein. A re- view of the record indicates that there are outstanding questions of material fact which make summary judg- ment improper at this point. However, the determina- tion of these outstanding questions of fact should be made in the first instance by the Secretary of the In- terior, as is provided for in the leases in this case. Pan American Petroleum Corp v. Udall, 192 F.Supp 626 (D.D.C. 1961). Ruling on this issue will therefore be deferred for a period of 120 days so that the Secretary will have the opportunity to determine whether offset wells are necessary; whether there has been a failure to develop; whether the leases limit the necessity for offset wells to drainage “by wells on adjoining lands not the property of the lessor” or whether there is a duty to drill offset wells on lands owned by the plaintiff; which leases have not been diligently developed in each geological formation; whether additional development wells can and should be drilled which will probably produce a profit for the defendants and which are necessary to insure “reasonable diligence in the operation of the property’; and whether cancellation is required of defendants’ rights to undeveloped geological formations or spacing units where offset wells should have been drilled. The Secre- tary should make these determinations and issue direc- 72a tives in accordance with his authority under the leases and the law, subject to review by this court. If the Secretary has failed to make such determinations within 120 days, these issues will be resolved after a full hear- ing on the merits. An order will be entered consistent with this Opinion. /s/ KE. L. Mechem United States District Judge ee | wi ds el hee wt aati Pe 73a IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW MEXICO No. 75-246-M Civil JICARILLA APACHE TRIBE, 7 Plaintiff, SOUTHERN UNION GAS COMPANY, et al., Defendants. [Filed Sept. 7. 1978] ORDER This matter having come up on cross-motions for sum- mary judgment by the plaintiff and the remaining de- fendants herein, and a memorandum opinion having been entered constituting the findings of fact and conclusions of law in this case; Now, Therefore, IT IS ORDERED that the plaintiff’s motion for sum- mary judgment as to the issue of “value” for royalty purposes is hereby denied and the defendants’ motions for summary judgment on this same issue are hereby granted; IT IS FURTHER ORDERED that a ruling on the issue of dual accounting, the cost of manufacture allow- ance, and the relief prayed for in paragraph two of the prayer for relief of the Fourth Cause of Action of the Amended Complaint is hereby deferred until the adminis- trative appeal on the issue of dual accounting is com- plete, unless there is unreasonable delay in the disposi- tion of this appeal; 74a IT IS FURTHER ORDERED that as to paragraph four of the prayer for relief of the Fourth Cause of Action of the Amended Complaint, summary judgment in favor of the defendants is hereby granted and the plain- tiff’s motion for summary judgment is hereby denied; IT IS FURTHER ORDERED that as to paragraph five of the prayer for relief of the Fourth Cause of Action of the Amended Complaint, the issue of offset wells and diligent development of the property, are hereby remanded to the Secretary of Interior for a period of 120 days for his determination of all facts and neces- sary or relevant issues which will enable him to issue directives consistent with his authority under the law, leases and regulations applicable herein, subject to review by this court. /s/ EK. L. Mechem United States District Judge wee aa RT ET et I eR EE eT eS _ ee Ie en Pe Ag 75a APPENDIX D IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW MEXICO No. 75-247-M Civil THE JICARILLA APACHE TRIBE, Plaintiff, vs. SOUTHERN UNION GAS Co., et al., Defendants. [Filed Dec. 19, 1978] MEMORANDUM OPINION AND ORDER This matter comes up for consideration on plaintiff’s motions to revise the Memorandum Opinion and Order filed September 7, 1978, and for leave to file a Second Amended Complaint. That portion of the Memorandum Opinion and Order of which plaintiff seeks revision granted summary judgment to defendants on the issue of whether the Secretary of Interior has determined “value” for royalty purposes in accordance with the terms of the leases and applicable federal regulations. I conclude in that Opinion that royalties have been paid by defendants “based upon a determination and billing by the Secre- tary,” that “value for royalty purposes . . . were [sic] the sales prices received by defendants at the wellhead,” that “(t]he Secretary, through the United States Geo- logical Survey (USGS) issued monthly billings or royal- ties to the defendants based upon these wellhead sales a eee 76a prices... ,” and “[t]his was an exercise of the Secre- tary’s discretion... .” Plaintiff, in its Motion to Revise, suggests that I am uninformed as to the actual import of the monthly State- ments of Account filed by defendants with the USGS and on which I have concluded the Secretary bases his de- termination of “value” for royalty purposes. Plaintiff further suggests that contrary to the language of the Memorandum Opinion, no appeal can be taken from the Secretary’s billing procedure as described above. Plaintiff argues that the monthly Statements of Ac- count cannot possibly be construed as billings for royalty purposes because the Secretary cannot have taken into account the requisite factors in determining value for royalty purposes on the basis of those Statements of Account alone. I adhere to my conclusion that whatever factors go into the formulation of those Statements of Account, the Statements refiect sales price received by the lessees for the quantities of oil and gas reported therein. Sales price may be taken by the Secretary to be conclusive evidence of value for royalty purposes. Stand- ard Form 157, paragraph 3(c); 30 CFR 221.47 (1977). His action in doing so does not constitute an abuse of its discretion. Plaintiff's claim that it has no means by which to timely appeal the Secretary’s monthly determination of value is raised for the first time in the Motion to Revise. It is true that the procedure in actual practice by which the Bureau of Indian Affairs receives no copy of the monthly Statements of Account until ninety days after payment is made by defendants appears to be in conflict with the requirement that notice of appeal be given with- in thirty days of the action complained of. See 30 CFR 290 (1977). While the Secretary’s month by month de- termination of value for royalty purposes may not for all practical purposes be appealable, the procedure itself is subject to appeal. If the Secretary’s procedure does 77a o not afford plaintiff an opportunity to make timely appeal under the regulations, plaintiff may seek one of two alternatives. It may institute an action to require that the billing procedure in practice be altered to afford plain- tiff its due process right te pursue administrative appeal of the month by month determinations of value or it may seek to require that the regulation setting out the re- quirements for appeal of administrative action, i.e., 30 CFR 290 (1977), be conformed to actual practice to permit plaintiff sufficient time in which to timely prose- cute appeals from the monthly Statements of Account. Neither of these alternatives conflict with my finding that the Secretary has made a determination of value for roy- alty purposes. While it is regrettable that the Secretary’s action, or more accurately his inaction, in doing no more than ac- cepting the lessees’ monthly Statements of Account and basing his determination of value for royalty purposes thereon, may not be in the best interests of plaintiff and further may not result in most profitable royalties due plaintiff from its leases, such action falls within the range of discretion allowed the Secretary. Unfortunately, whether or not I am in agreement with the Secretary’s course of action or whether I think the Secretary ought to have done, or ought to be doing, more on behalf of plain- tiff is not the point. It is not within my province, having found the Secretary to have acted within his discretion, to order him to do otherwise. Plaintiff’s motion to revise will be denied. Plaintiff has moved for leave to file its Second Amended Complaint. Rule 15(a) of the Federal Rules of Civil Procedure dictates that leave to amend “shall be freely given when justice so requires.” Leave to amend shall be granted absent good reason to the contrary. Foman v. Davis, 371 U.S. 178, 182 (1962). Whether or not to permit a party to amend its pleadings is left to the sound discretion of the trial court. Jd. Undue delay and preju- 78a dice to the opposing party are the primary factors to be considered regarding leave to amend. R.E.B., Inc. v. Ralston Purina Co., 525 F.2d 749, 751 (10th Cir. 1975). Only prejudice amounting to “grave injustice” justifies refusal to permit amendment. Patton v. Guyer, 443 F.2d 79, 86 (10th Cir. 1971). Having considered the motion and memorandum briefs of counsel and being fully ad- vised in the premises, I find that plaintiff’s Second Amended Complaint raises no substantially new legal issues, that it raises claims arising out of the same nu- cleus of facts and transactions described in plaintiff’s original Complaint and therefore relates back to the date of that Complaint, that the issues raised in the Second Amended Complaint will not result in an unrea- sonable-amount of additional discovery or a substantial delay in this action’s progress toward trial, that plain- tiff has not sought to amend after undue delay and that permitting plaintiff to so amend wiil not cause defend- ants prejudice amounting to grave injustice. Now, There- fore, IT IS ORDERED that plaintiff be, and hereby is, granted leave to file its Second Amended Complaint. The Clerk of the Court shall file plaintiff’s Second Amended Complaint this date. Defendants shall file their answers to the Second Amended Complaint within ten (10) days. IT IS FURTHER ORDERED that plaintiff’s motion to revise the Memorandum Opinion and Order of this Court filed September 7, 1978, be, and hereby is, denied. IT IS FURTHER ORDERED that this action be, and hereby is, set for trial on the merits on April 2, 1979, at 9:00 A.M. /s/ KE. L. Mechem United States District Judge bee 7a APPENDIX E IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW MEXICO No. 75-247-M Civil THE JICARILLA APACHE TRIBE, Plaintiff, vs. SUPRON ENERGY CORPORATION, SOUTHLAND ROYALTY CORPORATION, EXXON CORPORATION, and CECIL B. AN- DRUS, Secretary of Interior of United States of America, Defendants. [Filed Apr. 13, 1979] MEMORANDUM OPINION Plaintiff, the Jicarilla Apache Tribe (Tribe), filed its Second Amended Complaint on December 19, 1978, alleg- ing in two separate Causes of Action that defendants, Supron Energy Corporation (Supron), formerly South- ern Union Production Company, Southland Royalty Cor- poration (Southland), successor to Aztec Oil and Gas Company, and Exxon Corporation (Exxon), all foreign corporations, breached various oil and gas leases per- taining to Tribal lands entered into by defendants, or their precedessors in interest, with the Secretary of Interior (Secretary) on behalf of the Tribe. The Secre- tary, Cecil B. Andrus, is also a named defendant in this action. 80a Plaintiff further alleges in its Second Amended Com- plaint that the defendant energy companies have engaged in concerted illegal activities between and among them- selves in violation of the federal antitrust laws. Specif- ically, it is alleged in the First Cause of Action that Supron, Southern Union Gas Company (now Gas Com- pany of New Mexico (GCNM)) and Southern Union Gathering Company ', respectively, conspired to fix prices and conceal the actual consideration received for gas from Tribal leaseholds. The Tribe alleges that royalties accounted for to the United States Geological Survey (USGS) were paid to the Tribe on the basis of prices set below market value for gas drawn from the Tribe’s lands and sold by defendants Supron and Southland to GCNM. Plaintiff claims that the alleged conspiracies are continuing in nature and are in violation of Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1 (1976). Plain- tiff seeks treble damages based on defendants’ concerted activities pursuant to § 4 of the Clayton Antitrust Act, 15 U.S.C. § 15 (1976). Plaintiff alleges in the Second Cause of Action that Supron and Southland, and Supron and Exxon, respec- tively, conspired to conceal from the USGS and the Tribe the potential for development of leases held by defendants on Tribal lands in order to hold the leases without pro- duction for speculative purposes, in restraint of trade and in violation of Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1. As with its claim in the First Cause 1 Both GCNM and Southern Union Gathering Company were originally named defendants in this action. Defendants’ Stipulation for Settlement, agreed to by plaintiff and these two defendants on October 21, 1976, was filed in this action (Docket #112). A Partial Final Judgment and Decree based on the Stipulation for Settlement (and on a Supplemental Stipulation for Settlement not relevant hereto) and filed November 10, 1976, terminated these defendants’ participation in the case. The terms of the Stipulation nevertheless continue to affect the parties and issues remaining. See, infra at p. 10. 8la of Action, plaintiff alleges the continuing nature of the conspiracies herein alleged. Plaintiff seeks treble dam- ages on the alleged antitrust violations and further seeks declaratory judgment based on the alleged breach of con- tract insofar as it claims defendants have failed to dili- gently develop their leases and drill offset wells as re- quired by the leases. Such a declaration would subject the leases by their own terms to cancellation by the Secretary. In response to plaintiff’s Second Amended Complaint, Southland answered as to the First Cause of Action, rais- ing several affirmative defenses, and filed a motion to dismiss the Second Cause of Action for failure to state a claim, pursuant to Rule 12(b) (6), F.R.C.P. Southland later filed a motion to dismiss the Second Amended Com- plaint for lack of subject matter jurisdiction, pursuant to Rule 12(b) (1), or, in the alternative, for summary judgment, pursuant to Rule 56. Supron filed its Answer to the Second Amended Complaint and having set out its affirmative defenses, requested that they be treated as motions under Rule 12(b), pursuant to Local 5(c), Rules of the United States District Court for the District of New Mexico. Exxon answered as to the First Cause of Action, listing its affirmative defenses thereto, and in a Second Amended Motion to Dismiss plaintiff’s Second Cause of Action for failure to state a claim, seeks dis- missal of the Second Cause of Action, or, in the alterna- tive, dismissal of the antitrust claim against it in the Second Cause of Action. Plaintiff filed a consolidated response to defendants’ motions and oral argument on the motions was held on March 16, 1979. Subject Matter Jurisdiction Defendants’ various motions are directed primarily at plaintiff’s antitrust claims. Defendants all asserted that lack of subject matter jurisdiction bars cognizance of the antitrust claims set out in both Causes of Action in 82a plaintiffs Second Amended Complaint. Unlike a motion to dismiss for failure to state a claim on which relief can be granted, on a motion to dismiss for lack of sub- ject matter jurisdiction, plaintiff’s allegations of fact are not necessarily taken to be presumptively true. The Court may evaluate for itself the merits of plaintiff's jurisdictional claims and the plaintiff has the burden of proving that jurisdiction does exist. Mortensen v. First Federal Savings and Loan Ass’n, 549 F.2d 884, 891 (3rd Cir. 1977). The difficulty in resolving questions as this in antitrust cases arises from the language of Section 1 of the Sherman Act which binds together the jurisdictional basis for the action and a necessary element of tle claim itself. This procedural problem has resulted in varying conclusions among the Circuits. See, cases collected in Mortensen, 549 F.2d at 892-94. See also, George C. Frey Ready-Mix Concrete, Inc. v. Pine Hill Concrete Mix Corp., 554 F.2d 551, 554 n.3 (2nd Cir. 1977). The Supreme Court, in Hospital Building Co. v. Trus- tees of Rex Hospital, 425 U.S. 738 (1976), considered this problem and concluded that whether viewed under Rule 12(b) (1) or 12(b) (6), the analysis is not different: In either event, the initial inquiry is into the ade- quacy of the nexus between respondents’ conduct and interstate commerce that is alleged in the complaint. Id., at 742n.1. But see, George C. Frey Ready-Mixed Concrete, Inc. v. Pine Hill Concrete Mix Corp., 551 F.2d at 554n.3 (‘A motion to dismiss for lack of jurisdiction . . is inappropriate in antitrust] cases unless the inter- state commerce claim is patently frivolous. [citations omitted].”). The Court in the Rex case also noted that as to Congress’ power under the Commerce Clause, “Ts]ubsequent decisions by this Court have permitted the reach of the Sherman Act to expand along with expanding notions of congressional power. [citations omitted).” Id., at 748n.2; Gulf Oil Corp. v. Copp Paving Co., Inc., 419 EE EE 83a U.S. 186, 194-95 (1974). And the fear of preventing plaintiffs from litigating viable antitrust claims because of a questionable jurisdictional foundation has resulted in the conclusion that less is required to withstand a pre- trial jurisdictional attack in antitrust cases. Canadian American Oil Co. v. Union Oil Co. of California, 577 F.2d 468, 471 (9th Cir. 1978); Mortensen, supra. Absent a finding that there exists some nexus between defendants’ concerted activities and interstate commerce, subject matter jurisdiction over a federal antitrust claim cannot exist. Defendants contend that because the gas drawn from the Tribe’s lands is sold, processed, trans- ported and consumed solely in intrastate commerce, with- in the borders of the State of New Mexico, plaintiff can- not maintain its federal antitrust claims. Plaintiff, how- ever, has produced evidence by affidavit that liquid by- products extracted from gas from its lands is transported in interstate commerce. Southland insists this fact f true, is irrelevant as to itself since it sells gas it draws fi. m the Tribe’s lands at the wellhead, in New Mexico, and any entry of that gas into interstate commerce further down the line may not be imputed to it to establish the nexus required under the federal antitrust laws. South- land’s argument is misconceived insofar as it ignores its own status as an alleged coconspirator. The entire scope of the alleged conspiracy may be considered in determin- ing whether the requisite nexus exists, and, if found, it is sufficient to permit the Tribe to maintain its antitrust claims against all co-conspirators. In any event, the teaching of the Rex case permits a look beyond whether the gas produced from the Tribe’s lands crosses state lines. Hospital Building Co. v. Trustees of Rex Hospital, 425 US. at 744-76. | On the basis of the case law and the facts presented, I conclude plaintiff has sustained its burden to withstand notions of congressional power. [citations omitted].” Id., at 743n.2; Gulf Oil Corp. v. Copp Paving Co., Inc., 419 84a the oil and gas business, of which their New Mexico ac- tivities, including their development of plaintiff’s leases, are a part, and interstate commerce to sustain a finding that defendants’ activities, if not necessarily “in” inter- state commerce, “affect” interstate commerce. Fez, 425 U.S. at 744. “The effect on interstate commerce need not [be] gargantuan nor precisely mathematicized. It is sufficient if it is more than merely inconsequential. [citations omitted].” Woods Exploration & Producing Co., Inc. v. Aluminum Company of America, 438 F.2d 1286, 1303 (5th Cir. 1971). The requirement of the Rex case, that there be an “‘ynreasonable burden on the free and uninterrupted flow’” of interstate commerce, Rex, 425 U.S. at 746, is met here by the fact that defendants are large interstate corporations whose business of gathering, producing and selling, natural gas taken from the Tribe’s lands must necessarily have been an integral part of their larger, clearly interstate, business operation. As the Supreme Court noted in the Rex case, defendants in seeking to dismiss plaintiff’s antitrust claim on the basis of juris- diction face a “concededly rigorous standard.” Id., at 746. And, again, as the Court noted, whether plaintiff can make a prima facie case on its antitrust claims is another question. Jd., at 747n.0. Subject matter jurisdiction is a question of law which may be raised at any time by the parties or the Court. Therefore, my decision that plaintiff’s action withstands defendants’ pre-trial jurisdictional attacks does not settle the question conclusively. The standard by which I have decided defendants’ 12(b) (1) claims is not the same as the one to be applied on the merits of plaintiff’s antitrust claims, an element of which, as discussed above, is the nexus between defendants’ activities and interstate com- merce. Canadian American Oil Co. v. Union Oil Co. of California, supra. Should it appear at trial, or there- after, that subject matter jurisdiction over plaintiff’s anti- 85a trust claims may not in fact exist, the question will be taken up at that time. Defendants also claim that subject matter jurisdiction over plaintiff’s Second Cause of Action is lacking because the claims therein are based in contract, are not based on a federal question and therefore form no basis for the assertion of federal jursdiction. I have determined that plaintiff’s antitrust claims state a claim sufficient to with- stand defendants’ pre-trial attacks, clearly forming a basis for federal jurisdiction when coupled with the lan- guage of 28 U.S.C. 1862 (1976). Aside from this, how- ever, the Tribe’s contract claims, based on its leases with defendants, themselves suffice to establish federal juris- diction over the Second Cause of Action. The Tribe’s leases, entered into on its behalf by the Secretary, are subject to the continuing supervision of the Secretary. Poafpybitty v. Skelly Oil Co., 390 U.S. 365, 372-73 (1968). Given the fiduciary obligation of the Sec- retary to protect the Tribe’s proprietary interests, such as their interests in the leases held by defendants, the nature of the Tribe’s contract claims is decidedly federal. Oneida Indian Nation of New York v. County of Oneida, New York, 414 U.S. 661 (1974). This supports my con- clusion that the Tribe’s contract claims are independently founded in federal law and that jurisdiction is proper under 28 U.S.C. § 1362. Standing The second defect attributed to plaintiff’s antitrust claims by all defendants is its asserted lack of standing to sue under the federal antitrust laws. Standing to sue under § 4 of the Clayton Antitrust Act, 15 U.S.C. § 15, is a question of law to be determined by the trial court. John Lenore & Co. v. Olympia Brewing Co., 550 F.2d 495, 498 (9th Cir. 1977). Three tests for standing have been adopted by the federal Circuit Courts of Appeals. The “direct injury” test requires just that, a direct in- 86a jury to plaintiff resulting from defendants’ acts alleged to have been in violation of the antitrust laws. Loeb v. Eastman Kodak Co., 183 Fed. 704 (8rd Cir. 1910). Un- der this test, incidental, consequential or derivative in- jury to plaintiff is judged to be “too remote” to confer standing to sue under the antitrust laws. Nationwide Auto Appraiser Service, Inc. v. Ass’n of Casualty and Surety Cos., 882 F.2d 925, 929 (10th Cir. 1967). It is well to note that the questions of who has sustained anti- trust injury and whose injury is too remote to confer standing to sue under the antitrust laws are distinct from one another. Illinois Brick Co. v. Illinois, 481 U.S. 720, 728n.7 (1977). The “target area” test requires that [t]here ... be an identification of the affected area of the economy which is the target of the alleged anticompetitive conduct. And, it must be determined that the alleged injury was in that area. [citations omitted]. John Lenore & Co. v. Olympia Brewing Co., 550 F.2d at 499; Conference of Studio Unions v. Loew’s, Inc., 193 F.2d 51 (9th Cir. 1951), cert. den., 342 U.S. 919 (1952). Under the target area test, it is not enough for plaintiff to show it was “hit”? by defendants’ concerted activities; it must show it was “aimed at.” Karseal Corp. v. Rich- field Oil Corp., 221 F.2d 358, 362 (9th Cir. 1955). The third test for standing, recently adopted by the United States Court of Appeals for the Third Circuit, is essentially the standing test developed by the United States Supreme Court in Ass’n of Data Processing Service Organizations, Inc. c. Camp, 397 U.S. 150 (1970). Mala- mud v. Sinclair Oil Corp., 521 F.2d 1142 (6th Cir. 1975). In a reasoned opinion, the Third Circuit concluded that the two-pronged approach of Data Processing, looking to see if plaintiff has alleged “ ‘injury in fact,’” and if “ “the interest sought to be protected ... [was] arguably 87a within the zone of interests to be protected,’” Malamud v. Sinclair Oil Corp., 521 F.2d at 1145, quoting from Data Processing, 397 U.S. at 152-53, sufficiently satisfied Congress’ intent that the antitrust laws be limited in their application to plaintiffs who have suffered an “anti- trust injury ... of the type the antitrust laws were intended to prevent and that flows from that which makes defendants’ acts unlawful.” Brunswick Corp. v. Pueblo Bowl-O-Mat, 429 U.S. 477, 489 (1977) (emphasis in original). Plaintiff argues that the “direct injury” test ought to be applied in this case, citing the Tenth Circuit’s decision in Nationwide Auto Appraisers Service, Inc. v. Ass’n of Casualty and Surety Cos., supra. Defendants claim the “target area” test to be the better rule and the majority rule, and assert further that its application in this case is not foreclosed by the Nationwide case. Neither side has claimed knowledge of or re:iance on the Data Pro- cessing test set out in Malamud v. Sinclair Oil Corp., supra. I need not decide which test to use to determine whether plaintiff has standing to prosecute its antitrust claims, as I have concluded that plaintiff has made the requested showing of standing to sue under any of these tests. Under the terms of its leases, plaintiff may give timely notice to its lessees and take its royalties in kind. Plain- tiff alleges in its Second Amended Complaint that it desires to take royalties in kind but that the Stipulation for Settlement Agreement it effected with GCNM and Southern Union Gathering Company, see, supra at p. 2n.1, prevents it from doing so. As set out in the Stipulation, it appears that other parties, including Supron, have exclusive contractual rights to process gas and liquid by-products derived from plaintiff’s leases. The Tribe’s decision to take royalties in kind might impair those parties’ contractual rights. The Stipulation states that GCNM is excused from gathering or processing the 88a Tribe’s royalty gas taken in kind until the contractual! rights and obligations referred to are settled by agree- ment of the parties, which has not occurred, or by a court of competent jurisdiction. Stipulation for Settle- ment, {If 2, 3. I understand this language in the Stipulation to mean that it is the Tribe’s desire to become a competitor in the business of the sale of natural gas, necessarily then, a competitor with defendant energy companies. As a potential competitor, plaintiff falls within the target area of defendants’ alleged concerted activities and has alleg- edly sustained direct injury by reason thereof. Solinger v. A & M. Records, Inc., 586 F.2d 1304, 1309-10 (9th Cir. 1978), petition for cert. filed, 47 U.S.L.W. 3587 (U.S. Mar. 6, 1979) (Nos. 78-1315, 78-1317). Defend- ants resist such an interpretation of the standing doctrine by asserting that plaintiff is not a competitor and there- fore cannot have standing to sue under the federal anti- trust laws. “The antitrust laws, however, were enacted for ‘the protection of competition, not competitors,’ [cita- tion omitted].” Brunswick Corp. v. Pueblo Bowl-O-Mat, 429 U.S. at 488 (emphasis in original). Plaintiff’s claim that defendants’ activities have re- sulted in lesser royalties as a result of both the alleged price fixing and restraint of trade constitutes direct and tangible injury. Defendants insist that plaintiff, as a non-operating owner/lessor, has no standing to sue its lessees for antitrust violations. Defendants rely primar- ily on the theatre cases for their contention. Calderone Enterprises Corp. v. United Artists Theatre Circuit, Inc., 454 F.2d 1292 (2d Cir. 1971), cert. den., 406 U.S. 930 (1972) ; Melrose Realty Co. v. Loew’s, Inc., 234 F.2d 518 (8rd Cir.), cert. den., 352 U.S. 890 (1956), reh. den., 355 U.S. 900 (1957); Harrison v. Paramount Pictures, Inc., 115 F.Supp. 312 (E.D.Pa. 1953). In these cases, as defendants correctly point out, the lessor was denied 89a standing to sue his lessee because the conspiracy alleged was not directed at the lessor; the lessor’s injury was incidental to the conspiracy. As such, the cases are in- apposite. Here the Tribe alleges that the price fixing conspiracy was directly aimed at the Tribe by causing lesser royal- ties to accrue on defendants’ leases than were actually due. The result of the alleged conspiracy to limit development was not materially different. And in each case, defend- ants point nowhere else in an attempt to establish an aim of the conspiracies other than to injure the Tribe. Plain- tiff is the victim clearly intended to be harmed by these alleged activities and has made a claim of antitrust in- jury of the type of antitrust laws were intended to rem- edy. Brunswick Corp. v. Pueblo Bowl-O-Mat, supra; Cromar Co. v. Nuclear Materials and Equipment Corp., 543 F.2d 501, 506 (3rd Cir. 1976). Defendants’ claim that the gas remains in the ground notwithstanding the alleged lack of development, that given the rising nature of natural gas prices future pro- cessing of that gas can only result in higher royalties to the Tribe, and that therefore the Tribe has sustained no injury on which to predicate standing, is not persuasive. Drainage may prevent recovery in the future of as large a volume of gas as might have been withdrawn under a regime of orderly, timely development of the leases. No answer to such speculation one way or the other has been offered by the parties. While plaintiff’s substantive claims are subject to the conventional burden of proof at a hearing on the merits, they support a finding of standing to sue in the face of defendants’ motions. Accordingly, defendants’ motions to dismiss or for summary judgment predicated on plain- tiff’s lack of standing to sue under the antitrust laws will be denied. Defendants’ affirmative defenses raising this same claim will be stricken. 90a Immunity Defendants claim their alleged concerted activities are immune from scrutiny under the federal antitrust laws. It is their contention that because the Secretary has ex- tensive authority to regulate in the area of Indian oil and gas leases, see, Poalpybitty v. Skelly Oil Co., 390 U.S. at 372-73, application of the antitrust laws in this case would impermissibly infringe on the Secretary’s “adjudicative and remedial jurisdiction” in this area. Ricci v. Chicago Mercantile Exchange, 409 U.S. 289, 299 (1973). The question of immunity arises when conduct seemingly within the reach of the antitrust laws is also at least arguably protected or prohibited by another regulatory statute enacted by Congress. Id., at 299-300. Congress may grant, and has granted, express exemptions from the antitrust laws. The anti- trust laws do not apply to labor organizations, 15 U.S.C. $17 (1976), or to acts done which are authorized by numerous federal administrative agencies, including the Civil Aeronautics Board, the Federal Communications Commission, the Interstate Commerce Commission, the Federal Power Commission, the Securities and Exchange Commission in certain defined areas, the United States Maritime Commission and the Secretary of Agriculture, 15 U.S.C. § 18 1976). See also, United States v. Phila- delphia National Bank, 374 U.S. 321, 350 n.27 (1968) ; 49 U.S.C. § 5(12) (1976). Implied exemptions have been recognized only spar- ingly by the United State Supreme Court. See United States v. National Ass’n of Securities Dealers, 422 U.S. 694, 719-20 (1975); Ricci v. Chicago Mercantile Ex- change, 409 U.S. at 299-300 n.12; Silver v. N. Y. Stock Exchange, 373 U.S. 341 (1963); Pan American World Airways, Inc., v. United States, 8371 U.S. 296 (1963). “'T]he antitrust laws must give way if the regulatory scheme established by the [regulatory statute] is to work. 9la [citation omitted].” United States v. National Ass’n of Securities Dealers, 422 U.S. at 729-30. “Repeals of the antitrust laws by implication from a regulatory statute are strongly disfavored, and have only been found in cases of plain repugnancy between the antitrust and reg- ulatory provisions [footnotes omitted].” United States v. Philadelphia National Bank, 374 U.S. at 350-51. Defendants have cited no statutory regulatory power of the Secretary which conflicts with the “felt indispen- sable role of antitrust policy in the maintenance of a free economy,” United States v. Philadelphia National Bank, 374 U.S. at 348, nor have they established, beyond general conclusory statements in their briefs, that any such regulatory scheme of the Secretary’s, assuming one exists, cannot work because it is inhibited by the reach of the antitrust laws. Were immunity to be found extant in this case, the proper resolution would be not to dismiss plaintiff’s antitrust claims, but rather to stay proceedings pending determination by the Secretary of issues subject to his regulation, which, of course, would be subject to judicial review in this Court. And, it is clear that “agency approval of particular transactions does not itself confer antitrust immunity.” United States v. Na- tional Ass’n of Securities Dealers, 422 U.S. at 739 (White, J., diss.). The immunity defense is often raised in conjunction with claims that actions in the district court be stayed or dismissed because primary jurisdiction lies in an ad- ministrative agency or because plaintiff has failed to exhaust administrative remedies. Cf., Ricci v. Chicago Mercantile Exchange, supra. In Ricci, Mr. Justice Doug- las dissented, illuminating a point which I adopt in deny- ing defendants’ motions based on these defenses. [I]t would appear to be an anomaly to direct the plaintiff in a civil action to a federal supervising agency for a determination as to whether the regu- lations which it is charged to enforce have been vio- —— 92a lated, when the agency has, by its inaction, already shown every indication of sanctioning the alleged violation. By remanding, we are requiring the peti- tioner to seek from the regulators an admission of their failure to regulate (or negligence in regulat- ing). The odds of petitioner’s getting the [federal agency] now to find a violation in contradiction of its past inaction do not, in my view, justify the expense and delay to the petitioner. In the interests of orderly and efficient judicial administration, parties are not generally required to engage in futile gestures. Id. 409 U.S. at 308-09 (Douglas, J., diss.). The memo- randum of the Secretary filed with the Court March 12, 1979 adds emphasis, although little is necessary, to Mr. Justice Douglas’ plea in dissent. The memorandum reinforces my conclusion that the Secretary, although imbued with power to act, either will not or cannot do what is asked of him. The Secretary, in his memorandum, states that his agency, acting through the USGS, lacks the manpower | to make the determinations sought by plaintiff and or- dered by this Court. This excuse for nonaction, although it may be correct, is not justification for failing to do those acts required of him in his supervisory capacity as fiduciary of the federal trust responsibility to Indian tribes regarding the Tribe’s leases. Since it appears that remand to the Secretary would serve no useful purpose, I decline to rely further on the Secretary’s expertise or his power to act in this area. Accordingly, I will deny defendants’ motions insofar as they are based on the doc- trines of immunity, primary jurisdiction and exhaustion of administrative remedies. Laches, Statutes of Limitations Defendant energy companies have raised as affirmative defenses the claims that plaintiff’s action is barred by 93a laches, that its contract action is barred by the New Mexico statutes of limitations relating to contract actions, N.M.S.A. § 87-1-3 (1978 Comp.), and that its antitrust claims are barred by 15 U.S.C. §15b. Laches is not applicable to an antitrust claim seeking damages under $4 of the Clayton Act because of the overriding appli- cation of §15b. Cf., International Tel. and Tel. Corp. v. General Tel. & Electronics Corp., 518 F.2d 9138, 928 (9th Cir. 1975). “Lapse of time alone does not constitute laches [footnote omitted].” Shell v. Strong, 151 F.2d 909, 911 (10th Cir. 1945). Laches applies when, because of the delay in asserting one’s rights, prejudice or injustice would inure to the defendant by enforcing plaintiff’s rights. I find, as a matter of law, that no prejudice or injus- tice will fall on defendants should plaintiff prevail on its contract claims. Plaintiff seeks damages from 1970 to date. Its attempts to remedy what it understood to be violations of its leases with defendants began in 1973 when it sought the assistance of the Secretary. This lawsuit was filed in 1975. The time involved has not been so great that prejudice or injustice to defendants will have occurred on account of the claimed delay should plaintiff prevail on the merits. Defendants have not sug- gested, nor can I imagine, any basis for prejudice or injustice justifying application of the laches doctrine other than the claimed delay in filing this suit. Were this a diversity action, a New Mexico statute of limitations relating to the contract claim would apply. Erie Railroad Co. v. Thompkins, 304 U.S. 64 (19388). But this is not a diversity action, and although Congress has in the past specifically directed the application of state statutes of limitations to federal cases, see, e.g., 25 U.S.C. § 347 (1976) (state statutes of limitations ap- plicable to suits involving patent lands), no such Con- gressional action is relevant to this case. Defendants’ affirmative defenses based on the New Mexico statute of 94a limitations, N.M.S.A. § 37-1-8 (1978 Comp.), will be stricken. It does not appear that there exists a relevant federal statute of limitations insofar as the time for commencing an action on behalf of the Indians is concerned. The Indians may commence actions on their own behalf, not- withstanding the fact that the United States Government, and more particularly, the Secretary of the Interior, is entrusted with a fiduciary responsibility to protect the rights of the several Indian tribes. State of New Mewxico v. Aamodt, 587 F.2d 1102, 1107 (10th Cir. 1976); 25 U.S.C. § 2 (1976). The Secretary’s presence in this ac- tion as a party defendant evidences one aspect of the reasoning behind permitting the Indians to prosecute their own actions. Poafpybitty v. Skelly Oil Co., 390 U.S. at 374. Were the Government to have initiated this action on behalf of the Tribe, however, the time for com- mencing it would have been dictated by 28 U.S.C. § 2415 (a) (1976), which requires that actions for money dam- ages brought by the United States commence within six years and ninety days of the time the right of action accrues. Even if, by analogy, this statute were applied to this case, the Tribe, seeking damages from 1970 to date, filed this action in 1975, within the required time. Defendants claim 15 U.S.C. § 15b (1976) bars plain- tiff’s antitrust claims. Section 15b requires that an ac- tion be brought within four years of when it accrues. An antitrust action accrues when the defendant commits an act which injures a plaintiff’s business, Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 338, reh. den., 401 U.S. 1015 (1971). A defendant’s active, fraudulent concealment of anti- trust violations causing plaintiff injury tolls the running of the time period under § 15b. Public Service Company of New Mevwico v. General Electric Co., 315 F.2d 306, 310 (10th Cir.), cert. den. 374 U.S. 809 (1963). To toll the statute, fraudulent concealment must be accompanied by 95a a showing that the plaintiff’s exercise of due diligence did not uncover the injury caused to plaintiff. Bailey v. Glover, 88 U.S. (21 Wall.) 342, 348 (1874). As fraud is a fact question, I will reserve ruling on when the time period set out in §15b began to run with regard to plaintiff’s antitrust claims subject to the showing re- quired by the case law. Accordingly, defendants’ motions to dismiss on the basis of 15 U.S.C. § 15b, or more accu- rately, their attempt to limit the scope of plaintiff’s anti- trust claims to the four years immediately preceding the time this action was commenced, will be denied. Defend- ants’ affirmative defenses based on § 15b, however, will not be dismissed. Plaintiff's Release of GCNM and Southern Union Gathering Co. Defendant Supron has raised as an affirmative defense to plaintiff's First Cause of Action the claim that plain- tiff’s release of GCNM and Southern Union Gathering Company as parties defendant to this action acts to estop plaintiff’s claim of conspiracy between and among Supron and the released defendants. This release has left Supron as the only named conspirator in the First Cause of Action. Hornbook law requires the concerted activity of two or more entitites to constitute a violation of the antitrust laws. There being only one conspirator named in the First Cause of Action, the others having been released by plaintiff, Supron contends that plaintiff’s claim fails to state a claim on which relief can be granted, and that therefore, Supron’s motion to dismiss plaintiff’s First Cause of Action should be granted. “An antitrust action is in the nature of a tort action and defendants are jointly and severally liable” if lia- bility is found. Solomon v. Houston Corrugated Box Co., Inc., 526 F.2d 389, 392n.4 (5th Cir. 1976). “Thus an antitrust plaintiff may choose to sue but one of several co-conspirators, Walker Distributing Co. v. Lucky Lager 96a Brewing Co., 323 F.2d 1, 8 (9th Cir. 1963), and that one co-conspirator will be responsible for the entire amount of damages caused by all. (citation omitted).” Wainwright v. Krafico Corp., 58 F.R.D. 9, 12 (N.D.Ga. 1973). Or, as in this case, an antitrust plaintiff may choose to sue a number of co-conspirators, effect binding releases with one or more of them and continue to pur- sue his antitrust action against the one defendant re- maining in the suit. Whether a plaintiff’s release with co-conspirators serves to block prosecution of an additional co-conspirator not a party to the release must be determined solely from the intent of the plaintiff. “The straightforward rule is that a party releases only those other parties whom he intends to release.” Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. at 347. The Court in the Zenith Radio case adopted this rule for antitrust cases after considering the reasons for its initial application in Aro Mfg. Co. v. Convertible Top Co., 377 U.S. 476 (1964), a patent in- fringement case. Id., at 346. To conclude otherwise, the Court said, “would frustrate partial settlements, and thereby promote litigation, while adoption of the First Restatement rule [requiring express reservation of rights in order to save them] would create a trap for unwary plaintiffs’ attorneys.” Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. at 347. By its release of GCNM and Southern Union Gathering Company, the Tribe intended to extinguish its claim against those two parties only. The language of the Stipulation for Settlement could not be more clear: GCNM shall pay the Tribe within ten (10) days after the approval of this Stipulation by the Court and entry of the same as its Judgment, the sum of Six Hundred Thousand Dollars ($600,000.00) for settlement of all claims made by the Tribe against GCNM and Southern Union Gathering Company in 97a this case ... and for agreement that all claims and causes of action of the Tribe against GCNM and Southern Union Gathering Company set forth and alleged in the First Amended Complaint on file herein are released and discharged and all such claims and causes of action are dismissed with preju- dice as to the defendants GCNM and Southern Union Gathering Company. Stipulation for Settlement, 5. (emphasis supplied). This Stipulation shall be construed to pertain to all claims of the Tribe against GCNM and Southern Union Gathering Company relating to oil and gas . .., accruing to the date of this Stipulation. Stipulation for Settlement, 7. (emphasis supplied). All matters in controversy in this case between the Tribe and the Defendants GCNM and Southern Un- ion Gathering Company having been settled, the parties hereto request the Court to enter this Stipu- lation as its Final Judgment in this case, and the case shall be dismissed with prejudice in its en- tirety as to GCNM and Southern Union Gathering Company.... Stipulation for Settlement, 8. (emphasis supplied). Plaintiff’s intention was to release only the two de- fendants named in the Stipulation for Settlement. And notwithstanding the conclusion in Zenith Radio that ex- press reservation of a plaintiff’s rights as against re- maining defendants is not required, the Partial Final Judgment and Decree entered on November 10, 1976 evi- dences that the Tribe did just that in this case: IT IS FURTHER ORDERED, ADJUDGED AND DECREED that this action . . . and all claims for relief and causes of action contained therein, hereby are dismissed with prejudice as to Defendants GCNM and Southern Union Gathering Company; 98a provided that all claims set forth in Plaintiff’s First Amended Complaint and matters in controversy be- tween Plaintiff and the Deferdants Southern Union Production Company [Supron], Aztec Oil and Gas Company [Southland], Exxon Corporation and the Secretary of the Interior shall continue and this settlement shall not be construed as a settlement or determination of any of the issues in this cause ex- cept between the parties to said settlement. Partial Final Judgment and Decree, { 4. (emphasis sup- plied). Plaintiff’s release does not prevent it from assembling the proof necessary at a hearing on the merits to estab- lish that Supron and the released defendants conspired in violation of the antitrust laws. The release does not prevent the Tribe from obtaining evidence from the re- leased defendants to be used against Supron in estab- lishing antitrust violations. Indeed, it is likely that the evidence will be more readily forthcoming now that GCNM and Southern Union Gathering are insulated from further liability no matter what their testimony estab- lishes. Defendant Supron’s claim of estoppel and its corollary motion to dismiss on the basis of plaintiff’s release have no basis in law. The affirmative defenses will be stricken and the motion to dismiss will be denied. Corporate Identities Supron raises an additional affirmative defense claim- ing that the lack of separate corporate identities among the co-conspirators named in plaintiff’s Second Amended Complaint bars the prosecution of antitrust claims since a single entity cannot conspire with itself. This argu- ment deserves, and will receive, short shrift. “The fact that there is common ownership or control of the con- tracting corporations does not liberate them from the impact of the antitrust laws. (citations omitted).” Tim- 99a ken Roller Bearing Co. v. United States, 341 U.S. 598, 598 (1951). “The corporate interrelationships of the conspirators ..., are not determinative of the applicabil- ity of the Sherman Act. That statute is aimed at sub- stance rather than form. (citation omitted).” United States v. Yellow Cab Co., 382 U.S. 218, 227 (1947). Accord, Perma Life Mufflers, Inc. v. Int’l Parts Corp., 392 U.S. 134, 141-42 (1968). Supron’s Fourteenth Af- firmative Defense will be stricken as having no basis in law. Public Harm Supron’s Sixteenth Affirmative Defense raises an equally frivolous claim and will also be stricken. A show- ing of public harm is not a requisite to maintaining an action under Section 1 of the Sherman Act. Radiant Burners, Inc. v. Peoples Gas Light & Coke Co., 364 U.S. 656 (1961) (per curiam). “[T]o state a claim upon which relief can be granted [under 15 U.S.C. $1] ..., allegations adequate to show a violation and, in a pri- vate treble damage action, that plaintiff was damaged thereby are all the law requires.” Id., at 660. Damages Defendants have raised plaintiff’s failure to plead re- coverable damages as affirmative defenses based on which the Second Amended Complaint should be dis- missed. Damages is an essential element of the plain- tiff’s claim of breach of the leases. Goodwin v. Standard Oil Company of Louisiana, 290 Fed. 92 (8th Cir. 1923). A lessor may elect to seek his remedy in a breach of lease case such as this, Julian Petroleum Corp. v. Court- ney Petroleum Corp., 22 F.2d 360, 362 (9th Cir. 1927), and it may well be failure of proof, but not the unavail- ability of the remedy, which defeats his action. Jd. Proof of damages in a case as this necessarily relies on expert opinion testimony, but such evidence may carry plain- 100a tiff’s burden notwithstanding its ultimate inexactitude, this being a question for the factfinder. Stanolind Ou & Gas Co. v. Kimmel, 68 F.2d 520, 522 (10th Cir. 1934) ; 3 Summers Oil & Gas § 433, at 6-15. Defendants further rely on this Court’s Order of Sep- tember 8, 1978 granting partial summary judgment in their favor on the issue of value to substantiate their claim that, as a matter of law, plaintiff cannot prove recoverable damages. Plaintiff has alleged as part of its antitrust claims conspiracies to fix prices and defraud the USGS by defendants’ concerted failure to accurately report to USGS the actual consideration received for gas drawn from the Tribe’s lands. If plaintiffs make their proof on this claim, not withstanding my conclusion that the Secretary acted within his discretion in determining value for the purpose of computing the Tribe’s royalties pursuant to the terms of its leases held by defendants, that determination will have been based on erroneous in- formation, rendering the Secretary’s determinations of value clearly erroneous. If this chain of events is shown to have occurred, plaintiff may well be in a position to prove damages based on inadequate royalties paid to it. Further, should piaintiff prove its claim of conspiracy, its asserted intent to take royalty gas in kind, and thereby become a competitor in the natural gas market, may provide a source of recoverable damages under the antitrust laws. Woods Exploration & Producing Co., Inc. v. Aluminum Corp. of America, 488 F.2d at 1810. Defendants’ motions to dismiss, based on plaintiff’s fail- ure to allege recoverable damages, will be denied. Should plaintiff fail in its proof of conspiracy, defendants are free to raise the issues claimed herein on motions for directed verdict. Because I am unable to rule on defend- ants’ claims as a matter of law, their affirmative de- fenses going to the issues of damages and the effect of the September 8, 1978 Order on plaintiff’s claim of dam- ages will not be stricken. 10la Other Matters Defendant Supron’s Affirmative Defenses numbered 9, 10, 11, 12 and 13 will be dismissed as frivolous and hav- ing no basis in law. I need not comment on them further. At oral argument, counsel for both sides requested that I rule on those issues on which I reserved ruling in the September 8, 1978 Order pending the Secretary’s de- termination. Because I find the Secretary’s memorandum addressing those issues to be vague and inconclusive, I conclude that material issues of fact remain unresolved and in issue. As a result, I decline to grant summary judgment on those issues in favor of either plaintiff or defendants. They are properly part of those substantive claims to be addressed at the hearing on the merits in this case and will be ruled on at that time. An Order will be filed in accordance with this Memo- randum Opinion. /s/ EB. L. Mechem United States District Judge 102a IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW MEXICO No. 75-247-M Civil THE JICARILLA APACHE TRIBE, Plaintiff, vs. SUPRON ENERGY CORPORATION, SOUTHLAND ROYALTY CORPORATION, EXXON CORPORATION, and CECIL B. AN- DRUS, Secretary of Interior of United States of America, Defendants. [Filed Apr. 13, 1979] ORDER There having been a Memorandum Opinion filed which contains my findings and conclusions of law, having heard oral argument and considered the memoranda of counsel and further being fully advised in the premises; Now, Therefore, IT IS ORDERED that the motions of defendant South- land Royalty Company to dismiss the Second Amended Complaint for lack of subject matter jurisdiction or in the alternative for summary judgment and to dismiss the Second Cause of Action contained in the Second Amended Complaint for failure to state a claim on which relief can be granted be, and hereby are, denied. IT IS FURTHER ORDERED that defendant Exxon Corporation’s second amended motion to dismiss the Sec- ond Cause of Action contained in the Second Amended FE eee Bree Siren eE Seo | 103a Complaint for failure to state a claim on which relief can be granted or in the alternative to dismiss the antitrust claims alleged against Exxon in the Second Cause of Action be, and hereby is, denied. IT IS FURTHER ORDERED that Southland’s first, second and third affirmative defenses as to the First Cause of Action in the Second Amended Complaint, inso- far as the third affirmative defense is based on claims of laches and the application of N.M.S.A.37-1-3 (1978 Comp.), be, and hereby are, .tricken. IT IS FURTHER ORDERED that Exxon’s first, sec- ond, third, fourth and fifth affirmative defenses to the First Cause of Action in the Second Amended Complaint, insofar as the fifth affirmative defense is based on N.M.S.A.37-1-3 (1978 Comp.), be, and hereby are, stricken. IT IS FURTHER ORDERED that defendant Supron Energy Corporation’s first, second, third, fourth, fifth, sixth, seventh, ninth, tenth, eleventh, twelfth, thirteenth, fourteenth, sixteenth and seventeenth affirmative defenses to the Second Amended Complaint, except insofar as the seventh affirmative defense is based on 15 U.S.C. § 15b, be, and hereby are, stricken. IT IS FURTHER ORDERED that as to those matters on which ruling in the September 8, 1978 Memorandum Opinion and Order was deferred pending the Secretary’s determination, the parties’ motions for summary judg- ment be, and hereby are, denied. IT IS FURTHER ORDERED that as to those portions of the Second Amended Complaint to which certain of the defendants have not answered in light of pending motions to dismiss which have been denied by this Order, answers shall be filed no later than April 23, 1979. /s/ E.L. Mechem United States District Judge 104a APPENDIX F IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW MEXICO No. 75-247-M Civil THE JICARILLA APACHE TRIBE, . Plaintiff, Vv. SUPRON ENERGY CORPORATION, et al., Defendants. [Filed November 5, 1979] MEMORANDUM OPINION There having been a bench trial on the merits in this action in May and June, 1979, the following shall con- stitute my Findings of Fact and Conclusions of Law, pursuant to Rule 52 of the Federal Rules of Civil Pro- cedure. Plaintiff, The Jicarilla Apache Tribe (Tribe), in its Second Amended Complaint seeks treble damages based on alleged antitrust violations as well as damages and an accounting based on alleged breaches of the several leases which are the subject matter of this litigation. Defendants to these claims are Supron Energy Corpora- tion, formerly Southern Union Production Company (Supron), Southland Royalty Company, formerly Aztec Oil and Gas Company (Southland or Aztec), and Exxon Company, U.S.A., formerly Humble Refining Company (Exxon). Not all of plaintiff’s several claims are lodged A OLR ae aN lh DP oes ' 5 3 105a against each of these defendants-lessees, as is more fully set out below. Gas Company of New Mexico, formerly Southern Union Gas Company (GCNM or SUG), and Southern Union Gathering Company (SUGC), both wholly owned subsidiaries of Southern Union Company (Southern Union), originally were named defendants to this action. GCNM and SUGC effected a settlement agreement with the Tribe in late 1976. GCNM remains a third-party defendant to this action by virtue of a cross-claim lodged by Southland alleging a claim of indemnity under the gas purchase contract effected between these two com- panies for excess royalties Southland may be found to owe the Tribe. Also a named defendant is Cecil Andrus, Secretary of the Interior (Secretary), by virtue of the Tribe’s claim that the Secretary has breached his fiduciary obligation to the Tribe arising under provisions of the several leases which are the subject matter of this litigation. As to the defendant Secretary, the Tribe seeks declara- tory judgment that the alleged breach of fiduciary duty in fact occurred as well as an accounting for royalties allegedly owing by defendants-lessees which the Secre- tary and his named representatives have failed to secure for the Tribe under the leases in question. Plaintiff, at the trial on the merits in this action, moved to conform its pleadings to the evidence, which motion was granted. Accordingly, issues raised at trial which were not set out in plaintiff’s Second Amended Complaint will be considered in addition to the issues raised therein. Plaintiff’s claims have been at times as the shifting sands. Any issues plaintiff claims to have raised which are not considered in this Opinion are deemed to have fallen of their own weight or lack thereof. Plaintiff is an Indian Tribe organized and incorporated under the laws of the United States of America, 25 USC 106a 476-7, residing on an Executive Order Reservation in Rio Arriba and Sandoval Counties in Northern New Mexico. Defendants Supron, Southland and Exxon are foreign corporations qualified to do business or doing business in New Mexico who have their principle places of business outside the State of New Mexico. Subject matter jurisdiction is proper pursuant to 28 USC 1331(a) and 1362, 5 USC 701-06 and 15 USC 15. Defendant Supron, whose name was changed from Southern Union Production Company in April, 1977 by action of its stockholders, was originally an inactive cor- poration which was a wholly owned subsidiary of South- ern Union. Southern Union’s ownership of Supron’s stock was reduced to approximately 70% in the early 1970’s and further reduced to approximately 28% in December of 1976. Defendant Southland acquired Aztec by merger subsequent to the filing of the original complaint in this action in which Aztec was a named defendant. South- land succeeded to this litigation by virtue of the merger. Aztec was originally organized in 1950 as a wholly owned subsidiary corporation of Southern Union and was sub- sequently spun off in 1954. SUGC was organized as a wholly owned subsidiary of Southern Union in 1953 and remains such to date. From the year 1950 to the present, the Tribe has been lessor and royalty-interest owner of oil and gas leases approved by the Secretary of the Interior on the Tribe’s Reservation lands in the San Juan Basin. The leases which are the subject of this litigation are Jicarilla Lease Nos. 10, 47, 100, 101, 103-107, 145, 150, 153, 397 and 416-18. In 1950, SUG became the original lessee of leases numbered 10, 100, 101, 103 through 107, 145, 150 and 153. On May 20, 1952, SUG assigned separate undivided one- half interests in leases 104 and 107 to Humble Oil Com- pany (Exxon). On January 1, 1956, Exxon contracted to sell natural gas produced from leases i104 and 107 to SUG. Sales of natural gas continue to be made pursuant Z t ; ; * 7 : : 107a to this contract, as amended, to date. Exxon assigned its undivided one-half interest in lease 107 to Billy J. Knott effective February 9, 19738, reserving all lease hold rights below the base of the Dakota formation. Exxon’s convey- ance to Knott was approved by the Bureau of Indian Affairs (BIA) in May of 1979, effective retroactive to the date of conveyance. On January 1, 1955, SUG assigned separate undi- vided one-half interests in leases 100, 101, 103, 105, 106, 145, 150 and 153 to Aztec, at that time a wholly owned subsidiary company of SUG. Aztec acquired leases num- bered 397 and 416 through competitive lease sales in 1966 and 1969 respectively. Aztec and Southland have sold natural gas produced from their leases to SUG pursuant to a gas purchase contract executed December 12, 1953, as amended. On January 1, 1961, SUG assigned its rights in leases 10 and 47 and separate undivided one- half interests in leases 100, 101, 103-107, 145, 150 and 153 to Supron, at that time a wholly owned subsidiary of SUG. On that same date, Supron executed a gas pur- chase contract with SUG for sale of natural gas from the leases assigned to it. Two additional gas sales con- tracts were executed between Supron and SUG regarding sales from additional properties previously owned by SUG assigned to Supren. Supron acquired leases 417 and 418 through competitive lease sales in May of 1969. Numerous additional gas contracts have been evidenced throughout these proceedings but need not be particularly delineated here. Suffice it to say that the numerous deal- ings between and among the defendant energy companies and others have been commensurate with the complexities generally associated with the oil and gas industry. The contractual relations of the Tribe and defendants- lessees are governed by the provisions of Standard Lease Form 157 entered into on behalf of the Tribe by the Secretary pursuant to federal statutes, 25 USC 396(a) et seqg., and federal regulations, 25 CFR Part 171 and 108a 30 CFR Part 221. Under the terms of the lease and the applicable federal statutes and regulations, the Secretary has the duty and the jurisdiction to determine whether lessees are performing according to the terms and condi- tions of leases on Indian lands and to determine the “value” of any minerals produced for purposes of comput- ing royalties to be paid by the lessees. Prior to its institution of this action, the Tribe de manded in 1973 that the Secretary take appropriate and necessary action to make determinations required of him under the terms of the lease and to require lessees to perform their obligations as denominated in the lease provisions. The Tribe has continued to demand action of the Secretary since 1973. When it became clear to the Tribe that, in its opinion, its demands would not be heeded by the Secretary, it instituted this action in 1975. In addition to its demands on the Secretary, the Tribe has previously demanded of defendants-lessees that they pay royalties on gas produced based on the actual value of such gas, that they account separately for liquid hydro- carbon substances as required by the lease terms, that they drill such offset well as are necessary to protect lease lands from drainage, and that they exercise reasonable diligence in the development of oil and gas, while products can be secured in paying quantities, of leases held by these lessees on Reservation lands. The Secretary has assigned responsibility for the leases in question to the Area Oil and Gas Supervisor of the United States Geo- logical Survey (USGS) who has been stationed at various times in Roswell and Albuquerque, New Mexico and Durango, Colorado. THE TRIBE’S ANTITRUST CLAIMS The Tribe’s antitrust claims are several. It claims Supron monopolized the market for liquid hydrocarbons in restraint of trade and in violation of Section 1 of the Sherman Antitrust Act, 15 USC 1, in light of Supron’s 109a operation of the Lybrook Gasoline Extraction Plant from 1971 to 1976. It claims that the contract agreement en- tered into between Supron and SUG unlawfully fixed the price of liquid hydrocarbons in restraint of trade; that Southland and SUG unlawfully fixed the price of natural gas pursuant to gas purchase contracts effected between them on December 31, 1953 and January 2, 1954; that Supron and SUG unlawfully fixed the price of natural gas in restraint of trade pursuant to the gas purchase agreement effected betwen them on January 1, 1961; that Supron, SUG and SUGC fraudulently concealed from the USGS and the Tribe the amount of actual revenues received for gas and associated liquid hydrocarbons pro- . duced therefrom, which concealment amounted to a con- spiracy in restraint of trade and in violation of the Anti- trust Acts; that Supron, Southland and Exxon conspired to fraudulently fail to accurately account for liquid hy- drocarbons between 1973 and 1975 as required by the terms of the leases; and that Supron and Southland and Supron and Exxon respectively conspired in restraint of trade in 1975 and 1976 by failing to diligently develop the leases or drill offset wells required by the terms of the leases and in fraudulently concealing from the USGS and the Tribe the development potential of the leases in order to hold the properties which were the subject of the leases for speculation. Plaintiff further directs a claim of conspiracy in restraint of trade against Supron and SUG in that these defendants prevented the Tribe from taking its royalty gas in kind as provided under the terms of the leases. An additional claim of conspiracy to fix prices is lodged against SUG, SUGC and Supron based on their June, 1976 settlement agreements which resulted in the dismis- sal with prejudice of State Court cases brought in Texas and New Mexico concerning the price to be paid for nat- ural gas produced from leases on the Reservation. Finally, plaintiff claims that at various times until 1976, defendants Supron, SUGC, SUG and Aztec, violated Sec- ee 110a tion 8 of the Clayton Antitrust Act, 15 USC 19, which prohibits interlocking directorates of competing companies when the potential for antitrust violations by those com- panies exists.’ Subject matter jurisdiction over antitrust claims resides in a federal District Court on a finding that the activities which form the basis for alleged antitrust violations are in or affect interstate commerce. Hospital Building Co. v. Trustees of Rex Hospital, 425 U.S. 738 (1976). In my Memorandum Opinion dated April 13, 1979, I concluded, in denying defendants’ motions for summary judgment, that plaintiff had made sufficient showing of the required nexus between interstate commerce and the acts forming the basis of the alleged antitrust claims to withstand de- fendants’ motions for summary judgment. I conclude from facts adduced at trial that the activities of defend- ants which form the basis for plaintiff’s antitrust claims sufficiently affect interstate commerce to provide subject matter jurisdiction over plaintiff’s antitrust claims. I find further from facts adduced at trial that the Tribe is a natural gas producer and therefore a competitor in the sale of natural gas. The relevant geographical market in which to view plaintiff's antitrust claims is the San Juan Basin of Northern New Mexico, a discrete oil and gas producing region. The relevant product which is the subject of plain- tiff’s antitrust claims is natural gas, including natural gas sold intrastate and interstate. As to plaintiff’s claim of monopoly regarding the operation of the Lybrook plant, the relevant market is liquid hydrocarbons processed from natural gas marketed both intra-and interstate. Plaintiff’s claim of monopoly may be dispensed with briefly. Quite simply, the Tribe has failed to adduce proof 1 Plaintiff’s belated claim of price discrimination in violation of Section 2 of the Clayton Act, 15 USC 13, was raised and withdrawn, both after trial on the merits. _= = ae tt. tn at ln 145a accounting, the first, sale price, taking into account minimum value, and the second, dual acounting. As for the application of the NGPA to the Secretary’s determination of value for royalty purposes, it is contract price, and not value, to which the restrictions of the NGPA apply. 15 U.S.C. §§ 3311 et seg. The NGPA places a ceiling price on the “first sale” of natural gas, 15 U.S.C. 3301(21) (A) (i), and therefore applies to the Secretary’s determination of value insofar as it limits the price to be obtained for the first sale of natural gas. In this case the first sale occurs at the wellhead. Price at that point of sale is the starting point for the Secre- tary’s determination of value for royalty purposes. Be- cause the NGPA relates to price and not value, however, it may occur that the Secretary’s determination of value exceeds the ceiling price set by the NGPA. There is no legal impediment to the Secretary’s determining that value for royalty purposes exceeds sale price. This is not the first case in which value has been determined to be other than, and greater than, the contract price re- ceived for gas sold. See, e.g., Mobil Oil Corp. v. FPC, 463 F.2d 256, 364-5 (D.C. Cir.), cert. den., 406 U.S. 976 (1972). “Escalating royalty costs” based on values in excess of sale price have been upheld as reasonable unless they force the producer into a net loss situation. FERC v. Pennzoil Prod. Co., 489 U.S. 508 (1979). Because sale price is not binding on the Secretary in his determination of value for royalty purposes and because the NGPA applies to price, not value, the NGPA applies to the Sec- retary’s determination of value only to the extent that he takes price into account, as he must, in making his determination of value for royalty purposes. 30 C.F.R. § 221.47 (1979). See, Jicarilla Apache Tribe v. Supron Energy Corp., 479 F.Supp. 5386 (D.N.M. 1979) ; Supron Energy Corp., 46 I.B.L.A. at 188, 192; 25 C.F.R. 171.18; USGS Conservation Division Manual 647, 647.2.3; Lease, 1 3(c). 146a The NGPA by its own terms applies to the “first sale” of gas. The claim that it limits prices on residue gas produced at the tailgate of the Lybrook plant, therefore, is not persuasive. On the Jicarilla Reservation, gas is sold by producers at the welihead, the point of “first sale.” Si:bchapter I of the Act, 15 U.S.C. §§ 3311-33, is entitled “Wellhead Pricing.” By definition, the NGPA does not apply to prices set on tailgate volumes of residue gas. Nor does the NGPA apply to the sale price of liquids at the tailgate. Its application is limited to sales of natural gas, 15 U.S.C. § 3301(1), and does not apply to liquid products. The New Mexico Act establishes a ceiling for the price of natural gas produced in intrastate commerce. The NGPA expressly grants to the states power to prescribe lower ceiling prices on intrastate sales of natural gas than those imposed by the federal act. 15 U.S.C. 3432 (a). The New Mexico Act does not apply to sales from the Jicarilla Reservation, however, in light of my ruling, the law of this case, that such sales constitute interstate commerce. 479 F.Supp. at 541. To the extent that de- fendants have reported lower prices received for natural gas produced from these leases on the assumption that the New Mexico Act applies, corrected figures shall be submitted to the Secretary for his reaccounting. The Secretary, by counsel, has agreed to revise his ac- counting to reflect the proper pressure base for the years 1978 and ’79 with regard to volumes at the Lybrook plant. Additionally, the Secretary’s agreement to correct prices on Lease 104 for 1979 obviates the need for ruling on the admissibility of Supron’s Exhibit 2 offered at the hearing on defendants’ exceptions to the Secretary’s ac- counting. Defendants’ exceptions to the Secretary’s computation of cost of manufacturing allowances for the Lybrook plant will be sustained in part. The Secretary’s claim that defendants have waived their claimed deduction for 147a imputed interest in the computation of the cost of manu- facturing allowance used in determining liquid value in the net real method ought not stand based on the facts adduced at the May 13 hearing. The USGS employee who supervised the Secretary’s accounting, Mr. Car- michael, testified that imputed interest which was not claimed was not allowed and that the imputed interest claimed for 1974 and ’75 which was documented by de- fendants was permitted in the computation of cost of manufacturing allowances for those years. He admitted that not including the interest data made a significant change in the cost of manufacturing allowance computa- tion. Mr. MacFaren, a Southern Union Company rep- resentative, testified that notice that imputed interest was a permissible deduction was forwarded to Southern Union Refining Company and not to Southern Union Company. He admitted that certain information was not submitted to the USGS because of time constraints im- posed on the company by the agency. Exxon and South- land established that their reliance on Supron and South- ern Union Company for figures submitted to the USGS precluded their knowing waiver of additional costs to be computed in the manufacturing allowance. Defendants’ inadvertent omission of properly deductible costs does not constitute a knowing and voluntary waiver. I find that because USGS will have to prepare a reaccounting in any event and because no prejudice will follow them the inclusion of imputed interest figures properly deductible as a part of the cost of manufacturing allowance, such figures shall be supplied to the USGS and incorporated in its calculation of the cost of manufacturing allowance for net real accounting purposes. Defendants also complained of the Secretary’s utiliza- tion of a 10% figure for administrative costs in deter- mining the cost of manufacturing allowance. The use of a 10% allowance, based on the USGS Conservation Division Manual, has been upheld by the Interior Board 148a of Land Appeals (IBLA) in its administrative review of the actions of the Oil and Gas Supervisor with regard to the leases at issue here. Supron Energy Corp., 46 I.B.L.A. 181 (1980). The decision of the administrative agency is entitled to great weight and will not be dis- turbed unless it is shown to be arbitrary and capricious. Defendants claim that a 10% allowance is plainly incor- rect in light of the cost to the olant operator of fuel substantially ‘in excess of its wellhead price. Mr. Car- michael agreed that the actual cost of fuel to the plant operator was a deductible cost but refused to agree that the Lybrook plant operator was required to purchase gas to operate the plant instead of simply using gas from the stream and deducting it from tailgate volumes. I agree with Mr. Carmichael’s unarticulated conclusion that the sale of gas to the plant operator at a price in excess of wellhead prices does not constitute an arms-length trans- action which must be considered by the Secretary in com- puting the administrative cost properly allowed in com- puting the cost ef manufacturing allowance. Defendants also claim that the manufacturing allow- ance as computed by the Secretary was incorrect for fail- ure to include a deduction for state and federal taxes. This issue has been resolved in the IBLA decision, 46 I.B.L.A. at 195, which decision shall not be disturbed as I find that it is reasonable and not arbitrary or ca- pricious. Defendants also complain that the refusal to permit a deduction for gas used between the wellhead and the inlet of the plant is incorrect. The decision of the IBLA, in light of my ruling below on the Secretary’s net real accounting methodology, is the answer to defendants’ claim. In fact, fuel costs and shrinkage are taken into account in the dual-accounting system. Royalty is determined on the basis of the volume of products leaving the processing plant. These volumes are clearly diminished when gas is lost in transit to the di ved aie es > Se eo oe ey ee ee ee eee | ee ee es eee ee ae ee ee ee 149a plant or is used in processing. That is, if gas is lost in transit and/or consumed during processing, the amount of royalty will be reduced accordingly be- cause the amount of product sold at the tailgate of the plant will be reduced by an equivalent amount. Thus, the net-realization system automatically takes into account these factors. (emphasis in original) Supron Energy Corp., 46 1.B.L.A. at 195-6. On the basis of the decision of the IBLA and further be- cause I agree with the conceptual analysis set out therein, defendants’ exceptions regarding the Secretary’s calcula- tion of plant manufacturing allowance, except with re- gard to the deductions for imputed interest are over- ruled. Defendants’ remaining exceptions relate to the Secre- tary’s methodology in calculating royalties on the net real accounting method. As stated above and in my November 5, 1979 Memorandum Opinion, 479 F.Supp. at 549, royalties are based on volumes and values. For purposes of the net realization method, the volumes used are the volumes of residue gas and liquids at the tailgate of the processing plant attributable pro rata to the vol- ume of gas produced from each individual lease. Value at the tailgate for residue gas is the base price per MCF times a BTU adjustment on that gas.‘ Value for liquids is the net price per gallon of liquids produced. Defendants’ complaint with the Secretary’s net real accounting addresses the Secretary’s method of comput- ing the volumes of residue gas and liquids produced at the tailgate attributable to each lease. Exhibit 8 to the Secretary’s accounting sets out the method by which resi- 4The BTU adjustment for residue gas is routinely lower than that for wellhead volumes because the extraction of liquids through drips and in the plant process results in the diminution of heating content and therefore BTU value for residue gas. 150a due volumes of gas and liquids allocable to each lease were derived. Residue volume allocated to the lease [is] calcu- lated by multiplying the wellhead volume times the Plant Residue factor. The residue factor is calcu- lated by dividing the total Plant Residue volume by the total inlet volume of gas at the plant. ** * The total number of gallons allocated to the lease owner [is] calculated by multiplying the wellhead volume times the Plant Liquid factor. The Plant Liquid factor is calculated by dividing the total gal- lons recovered at the plant by the total plant inlet volume. This factor represents the gallons recovered from each MCF of gas processed. A mathematical configuration of the formula used by USGS to compute gas and liquids volumes at the tailgate allocable to each lease would appear as follows: Total Residue Gas Volume —_—_—-_——-——— KX Wellhead Volume/Lease = Total Inlet Volume Residue Gas Volume/Lease Total Liquid Gallons ad -—— X Wellhead Volume/Lease = Total Inlet Volume Liquid Gallons/Lease In each of these formulas, the “plant factor,” for residue gas and liquids respectively, is represented by the first fraction set out above. Defendants energy companies claim that the “factor” to be multiplied by wellhead vol- umes per lease to determine residue gas volume and liquid gallons at the tailgate is more appropriately de- termined by replacing “total inlet volume” in the de- nominator of the first fractions in the above formulas with “total wellhead volume.” This approach has re- cently been sustained in Supron Energy Corp., 46 I.B.L.A. at 195-6, and is contemplated by 30 C.F.R. § 211.46. That regulation requires that the volumes of gas and liquids per lease on which royalties are to be computed 3 f; fi 4 ; 5 3 ; bot y R a q é Fi a x 2 Se ts a a ee 15la equal the volumes of those products respectively at the tailgate times the inlet gas allocable per lease, where inlet gas allocable per lease equals total inlet volume divided by total wellhead volume, divided by total inlet gas volume, all times wellhead volume per lease. Mathe- matically stated, these formulas appear as follows: Total Total Inlet Volume _ Residue Gas Volume X Total Wellhead Volume X Wellhead Volume/Lease Total Inlet Volume = Residue Gas Volume/Lease Total Total Inlet Volume Liquid gallons X Total Wellhead Volume at Tailgate X Wellhead Total Inlet Volume Vebuae/Loonee = Liquid Gallons/Lease Mathematical computation reveals that the formulas mandated in 30 C.F.R. § 221.46 are no different than those advocated by Supron and the other defendant energy companies.” The USGS’ worksheet attached to Supron’s Exhibit AA requires, when computing value for royalty purposes for residue gas, that the price be mul- tiplied by the BTU adjustment factor and then by “resi- due volume,” and for liquids, that the price per gallon be multiplied by “liquid gallons” and then by the quan- tity 1 minus the cost of manufacturing allowance. The cost of manufacturing allowance accounts for deductible costs between the inlet and tailgate of the plant. The formula set out in § 221.46, and implemented by USGS in its own worksheet accounts for reasonably deductible costs between the wellhead and the inlet. Together they contemplate the entire process. 5 “Total inlet volume,” in both the numerator and denominator oi the first fraction in these formulas, cancels out, leaving pre- cisely the formulas advocated by defendant energy companies. 152a The IBLA correctly interpreted the use of the latter formulas above to make allowance for the shrinkage claimed by the defendants herein. 46 I.B.L.A. at 195. Indeed, defendants have agreed that if their proposed formula is adopted by the Court for use in the Secre- tary’s reaccounting, such computation appropriately ac- counts for their claimed deduction for gas lost in transit and used in processing other than between the inlet and the tailgate of the Lybrook plant. The Secretary claims that if the formula suggested by defendants is adopted, they will derive a double benefit with regard to gas which is either separated out or used for processing between the wellhead and inlet of the plant. No claim is made that royalties are not paid on the drip volumes sepa- rated out between the wellhead and the inlet. Gas not separated by drips is either used in the processing scheme or “unavoidably lost.” I find the former to be a de- ductible volume, 30 C.F.R. § 211.46, and the Secretary agrees the latter is a deductible volume. The theoretical residue factor derived by USGS by placing total inlet volume instead of total wellhead vol- ume in the denominator of the first fraction of its math- ematical formulas by which it computed residue gas vol- umed and gallons of liquid at the tailgate is incorrect. Nor does it comport with its own worksheet formula. The Secretary has offered no substantial justification for using theoretical rather than actual residue volumes in computing royalties. The Secretary shall reaccount such volumes using the appropriate formulas set out above. Although I have relied on the decision of the IBLA in Supron Energy Corp., 46 I.B.L.A. 181 (1980), this opinion is not to be construed as constituting judicial re- view thereof. No request has been made for such re- view at this time. My reliance on the IBLA decision is based on its unique applicability to the facts of this case and on what I find to be its correct analysis of issues to be determined here. 153a The Secretary, through his representative, shall pre- sent to me this reaccounting based on counsel’s agree- ments concerning the various clerical errors discovered in the Secretary’s initial accounting and on my rulings herein. Such accounting shall be presented for my con- sideration no later than 30 days from the date of this Memorandum Opinion and Order. The parties shall have ten days from the date they receive the Secretary’s re- accounting to file their exceptions thereto. Having ruled once on the parties’ exceptions, I anticipate no further exceptions except with regard to clerical errors. Addi- tional figures, if any, required by the Secretary to make his reaccounting shall be provided by defendants if necessary. Defendants Exxon and Gas Company of New Mexico have requested a ruling at this time on the “excess roy- alty” provisions in their purchasing agreements with re- gard to additional royalties which may result from the Secretary’s reaccounting. Those issues are the substance of cross-claims lodged by Southland and Exxon against Gas Company of New Mexico and need not be resolved at this time. Ruling on the cross-claims, therefore, will be deferred pending receipt and approval of the Secretary’s reaccounting. IT IS SO ORDERED. /s/ E.L. Mechem United States District Judge 154a IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW MEXiCO No. 75-247-M Civil JICARILLA APACHE TRIBE, Plaintiff, V. SUPRON ENERGY CorpP., et al., Defendants. [Filed Jan. 26, 1981] ORDER This matter comes up for consideration on the mo- tions to reconsider filed by the Jicarilla Apache Tribe (Tribe), the Secretary of Interior (Secretary), Gas Company of New Mexico (GCNM), Exxon Company, U.S.A. (Exxon), and Southland Royalty Company (Southland) and the motion of Southern Union Produc- tion Company (Supron) to clarify my Memorandum Opinion and Order of July 30, 1980. To be considered also are Southland’s and Exxon’s motions requesting leave to file amended crossclaims against GCNM and the motions of the Secretary, Southland, Supron and GCNM to strike the deposition of Dr. Alfred L. Parker. Finally, the Secretary has filed his amended accounting for ap- proval. Issues raised by the motions for reconsideration and clarification are: (1) whether my findings that the gas produced on the Jicarilla Apache Reservation is in in- 155a terstate commerce and therefore not subject to regula- tion by the New Mexico Natural Gas Price Act as amended, N.M. Stat. Ann. §§ 62-7-1 through 10 (Supp. 1979) (New Mexico Act) is in error; (2) whether New Mexico is precluded from asserting regulatory jurisdic- tion over gas produced on the Jicarilla Apache Reserva- tion by the Indian Commerce Clause of the United States Constitution. U.S. Const. Art. 1, § 8; (3) whether state regulation of the price to be charged for gas produced on the Jicarilla Apache Reservation has been preempted by federal statutes and regulations; (4) whether value for purposes of royalty computation may exceed the maximum price of the gas as established by the appli- cable regulatory act; (5) whether the net real method of accounting based on tailgate volumes requires the Sec- retary to determine royalties due on gas used and drip gas collected between the wellhead and the inlet of the processing plant. Interstate Commerce My finding that the actions forming the basis of the Tribe’s antitrust claims have an effect on interstate commerce does not necessitate the conclusion that the gas produced on the Jicarilla Apache Reservation is not subject to regulation by the New Mexico Gas Price Act. Subject matter jurisdiction over antitrust claims resides in Federal District Court on a finding that the activities which form the basis for the alleged antitrust violations are in or effect interstate commerce. Hosp. Bld. Co. v. Trustees of Rex Hosp., 425 U.S. 738 (1976). The Nat- ural Gas Policy Act of 1978, 15 U.S.C. §§ 3301 through 3432 (1976) (NGPA) allows a state to set the maxi- mum price for gas below the maximum established by the NGPA “for the first sale of natural gas produced in such state.” 15 U.S.C. 3432(a). The gas which is the subject matter of this litigation is produced and sold in New Mexico. Although the production and sale of Jicarilla gas does have an effect on interstate commerce 156a for purposes of subject matter jurisdiction over antitrust claims, the gas is nonetheless produced and sold in New Mexico. My previous finding that the Jicarilla gas is not subject to state regulation because of the interstate character of that gas was in error.! The Secretary need not revise his accounting on this issue, however, in light of my conclusion, infra, that the New Mexico Legislature did not intend the New Mexico Act apply to the first sale of natural gas produced on the Jicarilla Apache Reservation. Preemption Plaintiff argues that 30 C.F.R., Part 221 and 25 C.F.R. Part 171, have preempted state regulation of the price to be charged for gas produced on the Jicarilla Apache Reservation. Although the regulations relate to mineral development on an Indian reservation, they do not set the price which may be charged for natural gas produced on an Indian reservation. The NGPA controls the price for regulated gas with the exception which al- lows a state to set a lesser maximum price for intra- state gas. The price of regulated gas produced on the Jicarilla Apache Reservation is either controlled by the NGPA or the state act passed pursuant to the exception in the NGPA. Federal regulations which control aspects of mineral production from Indian lands other than the price which may be charged for natural gas have not preempted state regulation of the price to be charged for Jicarilla gas. 1The Tribe argues the New Mexico Act cannot regulate the price of Jicarilla gas because the Tribe may want to take royalty gas in kind and sell that gas in interstate commerce. The Tribe has not yet, however, taken any royalty in kind nor has the Tribe sold any natural gas in interstate commerce. I need not consider speculations on the Tribe’s intentions in order to determine whether the gas produced on the Jicarilla Reservation is beyond the regula- tory power of the New Mexico Act. 157a Indian Commerce Plaintiff’s argument that the New Mexico Act may not control the price of natural gas produced on the Jicarilla Apache Reservation because such control would be incon- sistent with the Indian Commerce Clause presents a constitutional question which I need not reach. Well- settled rules of statutory construction require I not reach the constitutional question in the absence of a “compelling necessity” to do so. Uhl v. Ness City, Kansas, 590 F.2d 839, 841 (10th Cir. 1979). Furthermore, considerations of comity and respect for state legislative judgment re- quire I find the New Mexico Act constitutional if the act reasonably may be interpreted so as not to con- flict with the federal Constitution. Swan v. Charlotte- Mecklenburg Bd. of Ed., 312 F.Supp. 503 (W.D.N.C. 1970) aff’d, North Carolina State Bd. of Ed. v. Swan, 402 U.S. 43 (1971). New Mexico has disclaimed all right and title to Indian lands. N.M.Const. art. 21,.§ 2.2 Although this type of disclaimer has not been interpreted literally, it has been recognized to preclude state jurisdiction over Indian lands, absent express Congressional authorization, where a state’s attempt to assert jurisdiction would interfere with a tribe’s right to make its own laws and be gov- erned by them. Mescalero Apache Tribe v. Jones, 411 U.S. 145 (1973) citing Williams v. Lee, 358 U.S. 217 (1959). I find that New Mexico did not attempt to assert juris- diction over Jicarilla land when the New Mexico Act was enacted. New Mexico tax statutes regarding oil and gas pro- duction allow taxes to be collected from Indian lands “to the extent authcrized or permitted by law.” See N.M. Stat. Ann. §§ 7-29-4; 7-31-4; 7-30-4 (1978). Those stat- 2A corresponding provision appears in the Enabling Act for New Mexico, 36 Stat. 557, Act of June 10, 1910. 158a utes illustrate that the New Mexico Legislature is aware that the State may assert jurisdiction over Indian land if there is no infringement upon a tribe’s right to govern itself or if Congress has expressly given its consent to the State to assert that jurisdiction. Additionally, in deter- mining legislative intent, “It is always appropriate to assume that our elected representatives, like other citizens know the law... .” Cannon v. University of Chicago, 441 U.S. 677, 696 (1979). I conclude the New Mexico legislature was aware of the limits upon its power to regulate Indian affairs when it enacted the New Mexico Natural Gas Price Act. Because of the New Mexico Legislature’s awareness of the limits upon its authority to act on Indian lands and its failure to make the New Mexico Act specifically applicable to gas production from Indian lands, I conclude the New Mexico Legislature did not intend the New Mexico Act to control the price for the first sale of gas produced from Indian lands. Even if the New Mexico Act specifically included gas produced from Indian lands, the State’s attempt to regu- late the price of that gas would be a clear violation of the Tribe’s right to make their own laws and be gov- erned by them.’ The Tenth Circuit recently held that the Jicarilla Apache Tribe has a retained sovereign right to levy severance taxes upon oil and gas production on their 3 Infringement upon the Tribe’s right to make their own laws and be governed by them is the appropriate constitutional standard because there is no congressional authorization allowing New Mexico to set the price of Jicarilla gas. It is well settled that a federal statute granting jurisdiction to a state over Indian affairs must do so expressly. McClanahan v. Arizona Tax Comm., 411 U.S. 164 (1973). The NGPA does not expressly grant power to New Mexico to set the maximum price of gas produced from Indian lands. Therefore, the proviso in the NGPA allowing state regula- tion of intrastate gas could not be a signal to the New Mexico Legislature that it was free to regulate the price of that gas. 2M PAN De A AO TTL 159a reservation.* Merrion v. Jicarilla Apache Tribe, 617 F.2d 537 (10th Cir. 1980), cert. granted 48 L.W. 2605 (1980) No. 80-11. The Tribe has a similar right to receive royalty for gas produced from their Reservation based upon a price at or below the federal maximum estab- lished in the NGPA. The Tribe’s interest in income generated from oil and gas production on its reservation is obvious. Because the price received for gas is one variable which the Secretary must consider in deter- mining value for royalty purposes, the royalty income the Tribe receives for its gas will be affected by the price charged for that gas. Additionally, the Court in Merrion, noted that 25 U.S.C. § 398(c) (1976) granting to the states power to levy severance taxes on oil and gas pro- duction from Executive Order Reservations was an in- tegral element of the Act of March 3, 1927, granting to the Indians all the royalty, bonus and rental from oil and gas leases on their reservations. 25 U.S.C. § 398(b) (1976). The Court further noted that the majority of legis!ators voting for those statutes “obviously thought that all benefits from the minerals on the reservation belong to the Indians.” Id. at 547. This observation and the holding in Merrion strongly support the conclusion that the right to receive royalty based upon a price at or below the federal maximum is an incident of tribal sovereignty. Reduced revenues re- sulting from State control of the price to be charged for Jicarilla gas, had the New Mexico Act attempted to assert that jurisdiction, would be an infringement upon the Tribe’s right to make their own laws and be governed by them. * The State of New Mexico may also levy taxes upon gas severed from the Jicarilla Apache Reservation pursuant to the express authorization to do so found at 25 U.S.C. §398(c). The right of the state to levy this tax, however, is not inconsistent with the Tribe’s inherent right as sovereign to levy a similar tax. Merrion, Id. at 547. 160a Value I decline to disturb my ruling that value for royalty computation purpose may exceed the maximum price of the gas as established by the NGPA. This issue was ex- tensively briefed before my November 5, 1979 finding relating to value and I am not persuaded that that find- ing was in error. Net Real Accounting The Secretary and the Tribe argue the net real method of accounting requires the Secretary to compute royalties on gas used between the wellhead and the inlet of the processing plant rather than solely on volumes of liquids and residue gas at the outlet of the processing plant. The Secretary also argues royalty must be computed upon liquid hydrocarbons collected as drip gas in the collection system in addition to volumes of liquids and gas at the outlet of the processing plant. A distinction must be drawn between drip gas collected and gas used to com- press or otherwise condition the gas. As noted in my Opinion and Order of November 5, 1979, the net real method of accounting contemplates royalty computed on the aggregate value of products pro- duced from the leases whether the products are recov- ered at the outlet of the processing plant or recovered as drip gas in the collection system. 479 F.Supp. at 550 n.12. Because drip gas is collected and sold and is not unavoidably lost or used in processing, the Secretary must account for volumes of liquids collected as drip gas in addition to the products leaving the outlet of the process- ing plant under the Net Real Method of Accounting. The Secretary shall have 30 days from the date this Opinion is filed to supplement his reaccounting to include liquids collected as drip gas. GCNM shall provide the Secretary with the information necessary to supplement his reaccounting. The amount of liquids collected as drip gas which originate from the Jicarilla Leases shall be calculated in a manner similar to the calculation of the Residue Factor and the Liquid Factor contained in Ex- l6la hibit 12 of the Secretary’s reaccounting. Drip factor shall, therefore, be calculated in the following manner: Drip Volume X Tot. Jic. Wellhead Vol. Tot. Wellhead Vol. ~ ‘Tot. Jic. Wellhead Vol. The Secretary shall then determine drip liquid gallons on a lease-by-lease basis by multiplying the various well- head volumes by the drip factor. Drip liquid gallons multiplied by the applicable drip liquid price less the manufacturing allowance provides drip liquid value. The drip liquid value attributed to the Jicarilla Leases shall then be combined with other Totai Value data con- tained in Exhibits 4, 5, 6 and 7 of the Secretary’s re- accounting to determine aggregate value utilizing the Net Real Method of Accounting. The Secretary’s and the Tribe’s arguments that royalty must be computed on gas used to compress or otherwise condition the gas between the wellhead and the inlet of the processing plant are without merit. Although the federal defendant admits computation based upon outlet volumes is the procedure contemplated by 36 C.F.R. 221.46, he argues nonetheless that he must be allowed to exercise his discretion to utilize a different method to fully protect the Tribe’s royalty interest pursuant to 30 C.F.R. 221.46(e). That Section allows the Secretary to employ a method other than the method contemplated by the regulation if the latter method is not “prac- ticable’. There was no showing that computation of royalties based upon outlet volumes is not practicable. With the exception of data relating to drip gas collected, which will be supplied to the Secretary pursuant to this Order, all of the data necessary to utilize the accounting method contemplated by 30 C.F.R. 221.46 has been fur- nished by the producers. The Secretary need not include in his net real accounting gas used to compress or other- wise condition the gas between the wellhead and the inlet of the processing plant. Drip Factor = ——— 162a Parker Deposition I decline to grant defendants’ motions to strike the deposition of Dr. Alfred L. Parker. Exxon’s and Southland’s Crossclaims Exxon’s and Southland’s motions requesting leave to file amended crossclaims against GCNM shall be denied. The crossclaims which Exxon and Southland seek to amend request from GCNM reimbursement for any “ex- cess royalty” which the producers are required to pay the tribe as a result of the Secretary’s reaccounting. The amended crossclaims request not only “excess royalty” as that term is defined in the contract between the pro- ducers and GCNM but also the difference between the amount GCNM paid the producers on the assumption the New Mexico Act controlled the price of the gas and the contract price which is greater than the price allowed by the New Mexico Act. Although I have concluded that the New Mexico Legis- lature did not intend the New Mexico Act have applica- tion on the Jicarilla Reservation, I similarly conclude the producers’ amended crossclaims would inject new issues into this lawsuit which would unduly complicate this case and which would better be brought separately. Because Southland and Exxon are not the only pro- ducers from whom GCNM purchases gas produced on Indian lands, it may be necessary for GCNM to join other producers in order to avoid inconsistent judgments respecting GCNM liability to those producers. Such joinder would unduly complicate this litigation and de- lay final resolution of plaintiff’s claims. Additionally, since Southland and Exxon are free to file suit against GCNM, they will suffer no prejudice by the denial of their motions. Supron, Exxon, and Southland shall sub- mit pleadings documenting the amounts they request in ban Me ae lad Sat 163a their respective crossclaims within 20 days of the filing of the Secretary’s supplemented reaccounting. The parties may also submit additional argument on the validity of those crossclaims within the same time limitation. Partial Final Judgment will be entered upon receipt of the Secretary’s supplemented reaccounting. Now, There- fore, IT IS ORDERED that Supron’s motion to clarify and the motions to reconsider filed by GCNM, Southland and Exxon, insofar as those motions relate to the appli- cability of the New Mexico Gas Price Act to gas produced on the Jicarilla Apache Reservation, shall be, and hereby are, denied. IT IS FURTHER ORDERED that the motions to re ‘eonsider filed by Southland and Exxon arguing that value may not exceed the maximum price of gas estab- lished by the NGPA shall be, and hereby are, denied. IT IS FURTHER ORDERED that the motions to re- consider filed by the Secretary and the Tribe insofar as those motions argue that royalties should be computed on gas used between the wellhead and the inlet of the processing plant shall be, and hereby are, denied. IT IS FURTHER ORDERED that the Tribe’s motion to reconsider insofar as that motion argues that royalty must be computed on the value of drip gas collected in the gas collection system shall be, and hereby is, granted. The Secretary shall compute the value of those liquids using the information supplied by GCNM and supple- ment his accounting accordingly. The Secretary shall sub- mit his supplemented reaccounting within thirty days from the date this order is filed. IT IS FURTHER ORDERED that the motions of Southland and Exxon requesting leave to file amended crossclaims shall be and hereby are, denied. Supron, 164a Southland and Exxor #hall submit pleadings specifying the amounts requestea « their pending crossclaims with- in twenty days from the date the Secretary’s supple- mented reaccounting is filed. /s/ E.L. Mechem Unit [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385018_2321%3A2. Public record. Not legal advice.