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From Antitrust Law Daily, May 21, 2015

Lack of injury suffocates conspiracy claims in CO2 royalty dispute

By Greg Hammond, J.D.

The owner of a working interest in a carbon-dioxide (CO2) well in Mississippi was unable to demonstrate antitrust injury in a suit alleging that an oil and gas company sells CO2 to its subsidiary at an artificially low price and pays its royalty owners based on that artificially low price, the U.S. Court of Appeals in New Orleans found. The lower court’s decision, granting the oil and gas company’s motion for summary judgment, was therefore affirmed (Waggoner v. Denbury Onshore, L.L.C., May 20, 2015, per curiam).

Background. James Waggoner and his company, J.W.W. Oil and Gas Exploration, Inc., own a 40 percent working interest in a CO2 well, entitling them a percentage of proceeds from Denbury Resources, Inc.’s sales of the CO2. Waggoner brought claims for antitrust violations under Mississippi’s antitrust statute for trusts and combines in restraint or hindrance of trade, as well as for civil conspiracy. Specifically, Waggoner alleges that Denbury Onshore, L.L.C. sells the CO2 to its subsidiary at an artificially low price and pays its royalty owners based on the artificially low price. The district court granted Denbury’s motion for summary judgment, finding that Waggoner lacks antitrust standing and failed to adequately plead the underlying tort of fraud in its civil-conspiracy claim. Waggoner appealed.

Antitrust injury. The court first noted that it previously explicitly held—in Bailey v. Shell Western E&P, Inc.—that a royalty-interest owner’s alleged injury of decreased royalty payments due to a conspiracy among oil companies is not antitrust injury (609 F.3d 710, 2010-1 Trade Cases ¶77,137). The same could be said of this case, according to the court, because Waggoner alleges decreased royalty payments on CO2 as a result of a conspiracy between Denbury and its affiliates. The court previously reasoned that if the oil company were to raise the price of gas on which royalty payments are based, the royalty-interest owner would benefit because his royalty payments would increase. “The defendant’s sale of CO2 for low prices is hardly the type of harm that Congress sought to redress in providing a private remedy for antitrust violations,” the court stated.

Civil conspiracy. Summary judgment in favor of Denbury also was affirmed by the appellate court with regard to Waggoner’s civil conspiracy claim, which was based on the underlying tort of fraud. The complaint contained no allegation of a false statement or any of the other elements of fraud, and Waggoner pointed to no summary-judgment evidence that suggested Denbury made a fraudulent statement.

The case number is 14-60310.

Attorneys: Dunbar Dowdy Watt (Dowdy, Cockerham & Watt) for James A. Waggoner and J.W.W. Oil and Gas Exploration, Inc. William Fredric Blair (Blair & Bondurant, PA) for Denbury Onshore, LLC, Denbury Gulf Coast Pipelines, LLC, and Denbury Resources, Inc.

Companies: J.W.W. Oil and Gas Exploration, Inc.; Denbury Onshore, L.L.C.; Denbury Gulf Coast Pipelines, L.L.C.; Denbury Resources, Inc.

MainStory: TopStory Antitrust LouisianaNews MississippiNews TexasNews

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