Dynegy Midstream Services, LP v. Versado Gas Processors, LLC,
No. 07-0043 (Tex. Aug. 28, 2009)(Willett)(oil gas and natural resources law)(gas sale dispute, “percentage
of proceeds” contract)(New Mexico Unfair Practices Act (NMUPA) as alternative theory to breach of contract)
The proper payment-measuring point under the contracts is the amount of gas sold at
the processor’s tailgate, not the amount delivered at the producer’s wellhead. That is,
a “percentage of proceeds” contract measures payment solely as a percentage of
proceeds from actual sales. As Apache concedes it was fully paid for all gas actually
sold, it is not entitled to recover on either its contract claim for unaccounted-for gas or
its New Mexico statutory claim. Also, Versado is entitled to a declaratory judgment
that it owes no additional payments for condensate collected at and resulting from the
operation of the Eunice North and South compressor stations. Accordingly, we affirm
the court of appeals’ judgment in part and reverse it in part. We remand the cause to
the trial court to render a new judgment consistent with this opinion.
DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP AND VERSADO GAS PROCESSORS, LLC v.
APACHE CORPORATION; from Harris County; 14th district (14-05-00010-CV, 214 SW3d 554, 12-07-06)
The Court affirms in part and reverses in part the court of appeals' judgment and remands the case to the
Justice Willett delivered the opinion of the Court.
View Electronic Briefs DYNEGY MIDSTREAM SERVICES, L.P. v. APACHE CORP.
CITATION FOR APPELLATE OPINION BELOW:
Apache Corp. v. Dynegy Midstream Servs., 214 S.W.3d 554 (Tex. App.—Houston [14th Dist.] 2006, pet.
granted)("This appeal arises from disagreements as to the interpretation of several gas contracts between
the predecessors of Apache Corporation and Versado Gas Processors. The disputes were submitted to a
jury, and Apache received favorable answers to the most critical questions addressed by the jury. However,
the trial court granted a judgment notwithstanding the verdict. In six issues, Apache contends the trial court
erred in rendering judgment because legally sufficient evidence supported its breach of contract and unfair
trade practice claims. Dynegy and Versado (collectively "Versado") filed a cross-appeal in which they
complain the trial court erred in awarding Apache a declaratory judgment for future field condensate
payments. In both appeals, the parties argue they are entitled to recover attorney's fees as the prevailing
party. We modify the judgment, affirm as modified, and remand the issue of Versado's attorney's fees.")
BLOG POSTS ON RELATING TO THIS CASE:
Dynegy Midstream Services, LP vs. Apache Corp. to be argued Sep. 9, 2008 (JCB)
Dynegy Midstream Services, LP vs. Versado Gas Processors, LLC (Tex. 2009)
Argued September 9, 2008
Justice Willett delivered the opinion of the Court.
In this gas-contract dispute, Apache Corporation seeks recovery for an allegedly large volume of
“unaccounted-for” gas that disappeared between production at Apache’s wellheads (where title to all gas
transferred to the processor) and sale to customers at the processing facility (the tailgate). We hold that
Apache’s claim is contrary to the governing contract language, which focuses on gas sold, not gas
delivered, thus avoiding disputes over how (and how much) gas failed to reach the point of sale. When
calculating the proceeds due to Apache under these “percentage of proceeds” contracts, only one criterion
matters: sales. Common throughout the natural-gas industry, these contracts unambiguously base payment
on the amount of gas ultimately sold at the tailgate (not the amount initially delivered at the wellhead), and
Apache admits it was paid in full for “every molecule of gas” sold at the tailgate of the processing plants.
Our decision today, besides clarifying the contractual payment standard — one that rewards processors
for minimizing leakage and maximizing the amount of gas actually sold — also addresses other claims. In
sum, we affirm the court of appeals’ judgment in part and reverse it in part, and remand to the trial court to
render a judgment in conformity with this opinion.
Though technical in nature, and part of a voluminous record, the relevant facts are neither complicated
nor disputed. Apache owns gas wells in Texas and New Mexico. Apache and Versado Gas Processors, LLC
are parties to eighteen gas-purchase contracts in issue. Under these contracts, gas is transported from
Apache’s wellheads through Versado’s gathering system (pipelines and compressor stations) to Versado’s
three processing plants:1 the Eunice, Monument, and Saunders plants. While en route some hydrocarbon
liquids, known as field condensate, precipitate out of the gas and are removed by Versado. The processing
plants employ compression, refrigeration, and other processes to remove water and other contaminants and
to produce gas liquids. The end products are marketable hydrocarbon liquids and “dry gas,” also known as
“residue gas.” Versado sells these products to third parties. The volume of residue gas sold is metered at
the plant tailgate and then sent to purchasers via sales lines.
Versado and amici curiae2 categorize the gas-purchase contracts as “percentage of proceeds” contracts.
The contracts are not identical, but all of them expressly provide that Versado is obliged to pay Apache a
percentage of the “net proceeds” generated from the sale of “residue gas.” Residue gas is not defined in
three of the contracts. In all the others the term is defined as gas that has arrived at the processing plants or
gas that is otherwise available for sale to third parties.3 The contracts also entitle Apache to compensation
for the hydrocarbon liquids extracted at the plants. All the contracts provide that title to the gas transfers to
Versado at or near the wellhead. Five of the contracts additionally provide that Apache conveys to Versado
“free of cost” all gas that is “flared, leaked, or otherwise lost” between production at the well and sale at the
processing plant tailgate.4
Gas is metered at the wellhead and at the plant tailgate. There is no dispute that more gas enters the
gathering system at Apache’s wellheads than exits at Versado’s tailgates, because (1) some gas is lost in
transmission due to pipeline leaks, (2) some gas is used to fuel equipment at the plant or along the pipeline
route, and (3) gas must sometimes be flared or vented during repair or other routine or emergency
operations. In addition, the volume of gas exiting the tailgate is smaller than the volume at the wellhead
because natural gas liquids and impurities such as water vapor are condensed from the gas stream before
the residue gas at the tailgate is sold to third parties.
After Apache conducted a routine audit, it concluded that Versado could not account for large quantities of
gas and that Apache was entitled to compensation for this unaccounted-for gas. Apache sued Versado for
breach of contract, and the parties also sought a declaratory judgment on whether Apache was entitled to
payment for condensate collected at compressor booster stations that had once been processing plants.
Apache also sued for violations of the New Mexico Unfair Practices Act (NMUPA).5
The trial court granted summary judgment for Versado on some claims, and the remaining claims went to
trial. With regard to unaccounted-for gas, Apache argued that unaccounted-for gas is a separate category
apart from plant and field losses and other categories of gas specified in the contracts. Apache based its
proof in part on some of Versado’s own internal accounting documents, which purported to account for
fueled, flared, or leaked gas, as well as other documents referencing “unaccounted-for” gas,
“unaccountables,” and “lost and unaccounted-for” gas. Versado contends that unaccounted-for gas simply
refers to gas that was used as fuel or lost through pipeline leaks or flaring, but regardless Versado is only
obliged under the contracts to pay Apache a percentage of the proceeds from the actual sales of residue
gas to third parties. Since Versado indisputably complied with this obligation, it claims it is not liable to
Apache as a matter of law.
The jury found that Versado failed to comply with its contractual obligation to pay Apache for unaccounted-
for gas, and found damages of $1,508,674. The jury also found that Versado and Dynegy deceived Apache
by engaging in an unfair or deceptive trade practice under the NMUPA, and that Apache’s damages on this
claim also resulted in damages of $1,508,674.
The trial court granted Versado’s motion for judgment notwithstanding the verdict, and entered a judgment
that Apache take nothing on its claims except the condensate claim. On this claim, the trial court rendered a
declaratory judgment that Apache was entitled to its allocated share of condensate collected at the Eunice
North and Eunice South booster stations, and awarded Apache $75,000 in attorney’s fees.
The court of appeals reversed the trial court on the unaccounted-for gas claim, and entered a judgment
for Apache of $1,508,674, consistent with the jury’s verdict.6 It concluded that the contracts unambiguously
did not permit Versado to deduct unaccounted-for gas when calculating residue gas.7 The court of appeals
also reversed the trial court on the condensate claim, concluding that Apache was not entitled to payment
for liquids condensing at the Eunice North and South booster stations.8 The court did not reach the NMUPA
claim, viewing the damages the jury awarded Apache under that claim as duplicative of damages awarded
under the contract claim for unaccounted-for gas.9
A. “Unaccounted-For” Gas Claim
Whether a contract is ambiguous is a legal question for the court.10 “A contract is ambiguous when its
meaning is uncertain and doubtful or is reasonably susceptible to more than one interpretation.”11 We give
contract terms their plain and ordinary meaning unless the instrument indicates the parties intended a
different meaning.12 A contract is not ambiguous simply because the parties disagree over its meaning.13
The court construes an unambiguous contract as a matter of law.14
Many contracts involving the transportation of goods apportion the risk of loss during transport. The
Uniform Commercial Code, for example, provides that parties may allocate this risk as they please by
express agreement,15 and also has provisions for allocating risk of loss in the absence of an express
agreement.16 Indeed, some of the gas contracts here make reference to Versado’s obligation as buyer to
pay Apache a percentage of the “net proceeds f.o.b. the Plant tailgate.” Generally, the Uniform Commercial
Code recognizes that when parties specify “F.O.B. the place of destination,” the risk of loss during transport
is on the seller.17
Under these contracts, Versado sold gas that reached the tailgate after processing, and Apache received
a percentage of the net proceeds derived from the sale of that gas. Both parties suffered from losses
occurring during the transportation of gas from the wellhead to the plant tailgate. The contracts did not
expressly require Versado to meet specified efficiency targets with respect to leakage, flaring, or Versado’s
use of gas as fuel. Nor did the contracts require Versado to pay Apache for losses that exceeded specified
thresholds or losses that could not be categorized.
The parties were free to apportion the risk of pipeline losses or other losses as they wished. Here, the
contracts unambiguously provided that title to the gas was conveyed to Versado at the wellhead and Apache’
s payment for the gas it sold Versado was limited to a percentage of the proceeds from actual sales of
residue gas at the tailgate.18 Apache points to no proof that Versado intentionally converted gas and sold it
to third parties without accounting to Apache for such sales,19 or evidence that Versado committed an
accounting error or mathematical miscalculation. There was no evidence at trial that Versado ever sold
unaccounted-for gas, or that Versado failed to pay Apache its share of the proceeds received from any
sales of residue gas. An Apache audit manager conceded at trial that “there is no evidence to support that
anything happened to this gas, the gas that you’re describing as unaccounted for except that it was either
flared or used as fuel or lost.” He further agreed that “there’s no evidence that any unaccounted for gas
went out the tailgate” and that Apache was paid for “every molecule of gas” that “went out the tailgate.” The
volume of gas sold at the tailgate was measured by pay meters owned by third parties, and Apache has
never challenged the meters’ accuracy.
Apache sought recovery for sales that never occurred, but the agreements did not require Versado to pay
Apache for gas unless it reached the tailgate and was sold to third parties. There is no provision in these
contracts for “unaccounted-for gas.” Nor did they impose liability on Versado for gas that was lost and
indisputably unavailable for sale at the tailgate, but for which Versado could not establish the precise reason
for the loss. Under these contracts, Versado was not contractually liable for lost gas whenever it could not
definitively explain a metering discrepancy between the wellhead and the tailgate.
Moreover, while the court of appeals described the gas contracts as “unambiguous as a matter of law,”20
it then relied in part on expert testimony regarding the “standard practice in the industry” for paying sellers
under gas-purchase agreements.21 According to Apache’s expert, industry practice requires that
unaccountable gas losses not exceed two percent, a percentage exceeded in this case.22 Experts have a
proper (if confined) role in litigation, but it is not to supply parol evidence to vary or contradict the terms of
unambiguous contracts.23 The parties could have agreed that Versado would pay Apache for losses
exceeding a contractually specified threshold, but as noted above, the contracts do not contain such terms.
The court of appeals also mentioned Versado’s internally generated documents that made reference to
unaccounted-for gas.24 This evidence might be relevant to show mathematical miscalculations or other
accounting errors, but again, there was no proof that these losses were anything other than gas that leaked,
was flared, or was used as fuel. This extrinsic evidence cannot alter the meaning of an unambiguous
contract that based payment on one criterion only: actual sales of residue gas at the tailgate.
Because the contracts unambiguously do not impose an obligation on Versado to compensate Apache for
“unaccounted-for” gas that was not sold at the plant tailgate, contract damages25 for gas lost between the
wellhead and the tailgate are not recoverable. Apache’s breach-of-contract claim fails as a matter of law.
B. NMUPA Claim
Apache asserts by conditional cross-petition that if its contract claim for unaccounted-for gas fails, it can
recover under the New Mexico Unfair Practices Act (NMUPA). The court of appeals did not reach this issue
because it held for Apache on its contract claim. Having rejected the contract claim, we address the NMUPA
The jury charge included questions covering the NMUPA claim. Specifically, the jury was asked whether
the defendants deceived Apache by an unfair or deceptive trade practice, whether the deception was willful,
and whether Apache suffered damages proximately caused by defendants’ deception. The jury answered
“yes” to these questions and found damages of $1,508,674, the same damages it found on the contract
claim for unaccounted-for gas.
The New Mexico Act covers unfair or deceptive trade practices defined to include “a false or misleading . .
. representation of any kind knowingly made in connection with the sale . . . of goods or services . . . by a
person in the regular course of his trade or commerce, which may, tends to or does deceive or mislead any
person . . . .”26 Apache’s theory of liability under the NMUPA is that Versado sent it inaccurate settlement
statements for gas sold at the plant tailgates, more specifically, that the statements failed to provide
sufficient information regarding unaccounted-for gas.27 However, Versado had no obligation to pay Apache
for gas that leaked, was flared, or was used to fuel equipment. Assuming that New Mexico law applies,28 and
assuming that Versado and Dynegy made misrepresentations falling under the NMUPA,29 there was no
evidence that these misrepresentations caused damages to Apache.
Recovery of actual damages under the NMUPA requires proof of actual causation — a cause “which
contributes to the loss and without which the loss would not have occurred.”30 The alleged
misrepresentations and nondisclosures all relate to Versado’s alleged failure to pay for unaccounted-for
gas, but as explained above, Versado had no obligation to pay Apache for unaccounted-for gas that was
never sold. Versado was only obligated to pay Apache for actual sales of residue gas, and there was no
evidence that Versado failed to pay Apache its contractually mandated percentage of such sales. Indeed,
Apache admits it was paid for “every molecule of gas” actually sold.31
C. Condensate Claim
As described above, the gathering system includes numerous compressor stations. These stations help
move gas from the wells to the processing plants. Liquid field condensate drops out of the gas stream
because of changes in pressure and temperature, and must be removed from the gathering system to
In 2000, Versado modernized its gathering system to make it more efficient, by consolidating its three
Eunice plants into a single processing plant. The North and South Eunice plants were converted to
compressor stations, two of about a dozen compressor stations along the gathering system that helped
move gas to the three remaining processing plants. After the conversion, the gas at the North and South
Eunice compressor stations proceeded to the Middle Eunice plant for processing. The Versado gathering
system retained two other processing plants, the Monument and Saunders plants. Versado pays Apache for
condensate produced at the three plants.
Because field condensate removed from the North and South Eunice stations had for some period been
trucked and commingled with condensate produced at the Middle Eunice processing plant, Versado paid
Apache for all the commingled condensate.32 Versado sought a declaratory judgment that it “does not have
an obligation to pay Apache for field condensate, including condensate that falls out in field compressor
stations that used to be gas processing plants.” The parties tried this issue to the court, which rendered a
declaratory judgment holding that, as to the eleven contracts in issue, Versado must pay Apache its
allocated share of all field condensate collected at the North and South Eunice stations. The court of
appeals disagreed, reasoning that under the contracts’ plain language, Versado had no such obligation.33
Reading each contract as a whole and harmonizing the various relevant provisions,34 we agree with the
court of appeals. The only plausible construction of the contracts is that Versado is not required to
compensate Apache for liquids that fall out of the gas stream at the North and South Eunice compressor
According to trial testimony, liquids that condense at compressor stations are not marketable without
further processing at a plant because they contain impurities such as water, hydrogen sulfide, and carbon
dioxide. Some of the contracts in issue do not define “plant,” but six of them define the term as a facility
where gas is processed.35 Unlike plants, the compressor stations do not treat the liquids; the liquids merely
collect at the station. Plants employ several stages or processes that include refrigeration or huge
compressors to deliberately make liquids. The compressor stations are necessary to move gas to a plant,
where the gas and liquids can be treated and sold to third parties. Compression at the plant is achieved
through multi-stage compression and at higher pressure than compression at the North and South Eunice
The contracts cannot be read to require Versado to compensate Apache for liquids that condense at the
two compressor stations. First, all the contracts provide that title to the gas transfers to Versado at or near
the Apache wellheads. Therefore, absent some more specific provision to the contrary, Versado owns any
liquids that condense from the gas stream downstream of the wellheads, at the compressor stations or
Second, all of the contracts in issue provide that Versado is only obliged to pay Apache for liquids “saved
and sold” at the “plant” or, in one contract, to pay Apache for “Products” defined as liquids “extracted
through Plant processing.” As explained above, the compressor stations are not plants. Further, gas liquids
were not “saved and sold” at the compressor stations.
Third, ten of the eleven contracts expressly provide that any liquids exiting the gas stream en route to the
final processing plants belong to Versado.36 These provisions, requiring Versado to keep the gathering
system reasonably clear of obstructions, are consistent with trial evidence that liquids leaving the gas stream
prior to reaching the final processing plant are, to some extent, a nuisance because they can obstruct gas
flow or unduly raise pressure. These provisions are also consistent with the provisions that Versado takes
title to all the gas at the wellhead, and the provisions that Versado is only compelled to pay Apache for
liquids produced at the processing plants at the other end of Versado’s gathering systems. Of the six
contracts that define “Plant,” they all define it as facilities where the gas is processed, as opposed to the
gathering system, separately defined in all these contracts as the pipelines and equipment used to deliver
gas to the plant.37 None of these contracts specify that condensate precipitating at compressor stations is
treated differently from condensate precipitating at any other point in the gathering system.
Apache emphasizes that the North and South Eunice compressor stations used to be processing plants,
but this fact does not alter our construction of the contracts. Other plants were converted to compressor
stations, and Apache does not argue that they too must be treated as plants. Nor does Apache argue it
should be paid for field condensate produced at compressor stations that have always been compressor
stations. The North and South Eunice stations compress the gas to the same pressure as other compressor
stations. Nothing in the contracts prohibits the conversion of processing plants into compressor stations as
part of a gathering-system upgrade that reduced emissions, increased the overall efficiency of the system,
and in fact benefitted producers as well as Versado.38
Apache argues that the contracts expressly state that their purpose is to extract liquid hydrocarbons. For
example, five of the contracts state that the gas is being sold “for the principle [sic] purpose of extracting
therefrom such Liquid Hydrocarbon Products as may be extracted at the Plant.” These provisions, however,
are unhelpful in determining whether a compressor station is a “plant.” They do not contradict the contract
provisions described above that make clear Versado (1) is only obliged to pay for liquids “saved and sold” at
the plant, (2) owns all the gas after it leaves the wellhead, and (3) owns any liquids that fall out of the gas in
the gathering system. These contracts expressly distinguish the “Plant” from the “Gas Gathering System.”
Further, these contracts only oblige Versado to pay Apache for “Liquid Hydrocarbon Products,” a defined
term that expressly excludes “drip, condensate or scrubber oil collected prior to the first stage of
compression within the Plant.” Hence, unless the liquids are collected “within the Plant,” as opposed to the
gathering system that includes compressor stations necessary to move the gas to the processing plant,
Versado is not obliged to pay Apache for the liquids.
In sum, construing each contract as a whole and examining the relevant provisions of each, we agree with
the court of appeals that none of the contracts required Versado to compensate Apache for field
condensate that fell out of the gas stream at the Eunice North and South compressor stations.
The proper payment-measuring point under the contracts is the amount of gas sold at the processor’s
tailgate, not the amount delivered at the producer’s wellhead. That is, a “percentage of proceeds” contract
measures payment solely as a percentage of proceeds from actual sales. As Apache concedes it was fully
paid for all gas actually sold, it is not entitled to recover on either its contract claim for unaccounted-for gas
or its New Mexico statutory claim. Also, Versado is entitled to a declaratory judgment that it owes no
additional payments for condensate collected at and resulting from the operation of the Eunice North and
South compressor stations. Accordingly, we affirm the court of appeals’ judgment in part and reverse it in
part. We remand the cause to the trial court to render a new judgment consistent with this opinion.39
Don. R. Willett
OPINION DELIVERED: August 28, 2009
1 Petitioner Dynegy Midstream Services, Limited
Partnership is a co-owner of Versado. Because Versado
has no employees, Dynegy operated the processing
plants and performed the contracts.
2 The Gas Processors Association and the Texas
3 Two of the contracts define Residue Gas as “any gas
connected to Buyer’s plant gas gathering system which
is sold before processing or which is discharged in the
form of gas from the gas processing facility.”
Five contracts define it (with some differences in
capitalization) as “[g]as which is discharged in the form
of gas from the Plant before or after processing or sold
as fuel from Buyer’s gathering system.”
Five define it as “the quantity of Gas which
remains after the Liquid Hydrocarbon Products are
extracted, the acid gas and any other components are
removed from the Gas to make the Residue Gas
merchantable and after the allocated volumes of Plant
fuel, field and Plant compressor fuel, Plant and field
losses, and flare are deducted. It shall also mean Gas
bypassed around the Plant.”
Two define it as “the quantity of Gas remaining
after the (a) extraction of Natural Gasoline and Additional
Products, (b) plant fuel requirements, (c) plant and field
losses, (d) field and plant compressor fuel, and (e) flare.”
One defines it as “[t]hat portion of the gas
remaining after the extraction of Products and
deductions for fuel, flare and loss.”
4 These five contracts provide: “Seller hereby conveys to
Buyer free of cost to Buyer, title to the Gas consumed as
fuel in the operation of the Plant and Gathering System,
and all Gas which is flared, leaked or otherwise lost in
the operation of the Plant and Gathering System . . . .”
5 N.M. Stat. §§ 57-12-1 to 57-12-24. Apache asserted
other claims that are not relevant to this appeal,
including claims that the defendants had engaged in
sham inter-affiliate sales at artificially low prices, and
had breached an obligation to market residue gas.
6 214 S.W.3d 554, 561, 567.
7 Id. at 560.
8 Id. at 564, 567.
9 See id. at 561 (“Because we have sustained Apache’s
second issue [regarding the unaccounted-for gas
contract claim], we need not address Apache’s first
issue challenging the judgment on the New Mexico
Unfair Practices Act . . . .”).
10 Heritage Res., Inc. v. NationsBank, 939 S.W.2d 118,
121 (Tex. 1996).
13 Columbia Gas Transmission Corp. v. New Ulm Gas,
Ltd., 940 S.W.2d 587, 589 (Tex. 1996).
14 Am. Mfrs. Mut. Ins. Co. v. Schaefer, 124 S.W.3d 154,
157 (Tex. 2003).
15 Tex. Bus. & Com. Code § 2.509(d). “The Code invites
any lawyer who drafts a contract for the sale of goods to
include a clause that specifically allocates the risk of
loss between the buyer and the seller.” James J. White
& Robert S. Summers, Uniform Commercial Code § 5-1,
at 332 (5th ed. 2006).
16 See Tex. Bus. & Com. Code §§ 2.319, .503, .504, .
17 See id. §§ 2.319(a)(2), 2.509(a)(2), 2.509(c). “[W]hen
the contract reads ‘F.O.B. buyer’s place of business,’
both [§ 2-509(a)(2) and § 2-319(a)(2)] make it clear that
the risk does not pass to the buyer until the goods are
tendered to the buyer at the place of destination.” James
J. White & Robert S. Summers, Uniform Commercial
Code § 5-2, at 339 (5th ed. 2006). We do not suggest
that these provisions of the Uniform Commercial Code
actually govern this dispute, but refer to them only to
illustrate the use of the term “f.o.b” in another context.
Here the issue is complicated by the fact that the buyer,
Versado, owned the entire gathering system and took
title to the gas at or near the wellhead under the express
terms of the contracts.
18 Apache argues that the risk of loss for unaccounted-
for gas falls on Versado under section 2.509(c) of the
Uniform Commercial Code, Tex. Bus & Com. Code §
2.509(c), which states:
In any case not within Subsection (a) or (b), the risk of
loss passes to the buyer on his receipt of the goods if
the seller is a merchant; otherwise the risk passes to
the buyer on tender of delivery.
Assuming that the contracts are subject to the Code, see
El Paso Natural Gas Co. v. Minco Oil & Gas, Inc., 8 S.W.
3d 309, 313 (Tex. 1999), as noted above section 2.509
(d) provides that “[t]he provisions of this section are
subject to contrary agreement of the parties,” and here
the parties made express provision to the contrary.
19 Nor do we consider the legal consequences that
would follow in tort or contract for such an intentional
theft of gas by the buyer under these contracts.
20 214 S.W.3d at 560.
21 Id. at 561.
22 Apache also presented evidence that Versado’s own
goal was to limit gas losses to two percent.
23 See Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v. CBI
Indus., Inc., 907 S.W.2d 517, 520 (Tex. 1995) (“Only
where a contract is first determined to be ambiguous
may the courts . . . admit extraneous evidence to
determine the true meaning of the instrument.”); Coker v.
Coker, 650 S.W.2d 391, 393 (Tex. 1983) (“If the written
instrument is so worded that it can be given a certain or
definite legal meaning or interpretation, then it is not
ambiguous and the court will construe the contract as a
matter of law.”); Miller v. Gray, 149 S.W.2d 582, 583 (Tex.
1941) (“[E]vidence of custom is admissible only to
explain an ambiguous contract or to add to it an element
not in contravention of its terms; but such evidence is
never admissible to contradict the plain unambiguous
covenants and agreements expressed in the contract
24 214 S.W.3d at 561. As noted above, several of these
exhibits made reference to “unaccounted-for” gas,
“unaccountables,” and “lost and unaccounted-for” gas.
For example, several exhibits plotted, by month,
“unaccountables” as a percentage of production at the
25 We note that Apache did not pursue at trial a
common-law tort recovery for these losses, although it
alleged a negligence cause of action against Dynegy.
We do not consider whether a negligence or other tort
theory would be valid on these facts. The unaccounted-
for gas claim was tried as a contract claim against
Versado. As to liability, the jury was asked whether
Versado failed “to comply with each of the Contracts by
failing to pay Apache for unaccounted-for gas,” and as to
damages, the jury was asked to assess contract
damages equal to the difference “between the amount
Apache was entitled to be paid for unaccounted-for gas
under the Contracts, and the amount that was actually
paid by Versado for unaccounted-for gas.”
26 N.M. Stat. § 57-12-2(D).
27 For example, Apache’s opening brief as cross-
petitioner contends that the settlement statements
“lacked enough information to determine how much gas
was unaccounted for” and “were so misleading that
Apache could not determine that any gas was
unaccounted-for;” that “even Dynegy’s own
measurement consultant was unable to calculate the
amount of unaccounted-for gas from one of its own
settlement statements;” that Versado’s and Dynegy’s
“failure to disclose the amounts being used as fuel,
being flared, and being leaked prevented Apache from
realizing that the defendants were not paying for huge
amounts of this unaccounted-for gas;” and that their
“statements tended to deceive Apache by hiding the vast
amounts of unaccounted-for gas.”
28 Apache claims that New Mexico law applies because
the processing plants are in New Mexico.
29 But see Santa Fe Custom Shutters & Doors, Inc. v.
Home Depot U.S.A., Inc., 113 P.3d 347, 352–53 (N.M. Ct.
App. 2005) (holding that seller of goods or services
cannot sue under the NMUPA).
30 The New Mexico Supreme Court has promulgated
uniform civil jury instructions. As Apache points out, and
as reflected in the jury charge, Uniform Jury Instruction
13-1709 provides: “A cause of a loss is a factor which
contributes to the loss and without which the loss would
not have occurred. It need not be the only cause.” The
Committee Commentary to this Rule states that it
applies to the Unfair Practices Act. See also N.M. Stat. §
57-12-10(B) (setting out NMUPA cause of action and
providing for recovery of “actual damages” to “[a]ny
person who suffers any loss of money or property . . . as
a result of any employment by another person of a
method, act or practice declared unlawful by the Unfair
31 Apache did not establish that better accounting by
Versado would have resulted in additional sales of gas,
on which payment obligations to Apache would have
accrued under the contracts.
32 Versado pursued at trial a counterclaim for unjust
enrichment, seeking recovery of prior payments Versado
had made to Apache for condensate recovered from the
North and South Eunice compressor stations, but the
jury rejected this claim for a refund. The court of appeals
likewise rejected this claim, reasoning, under the
“voluntary-payment rule,” that Apache did not wrongfully
retain money from Versado because Versado had
voluntarily made the payments. 214 S.W.3d at 564–65
(citing BMG Direct Mktg., Inc. v. Peake, 178 S.W.3d 763,
768 (Tex. 2005)).
33 214 S.W.3d at 564.
34 See Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983)
(“[T]o ascertain the true intentions of the parties as
expressed in the instrument . . . courts should examine
and consider the entire writing in an effort to harmonize
and give effect to all the provisions of the contract so that
none will be rendered meaningless.”) (emphasis
35 Five of the contracts define “Plant” as “the facilities
used by Buyer to process gas.” One contract defines
“Plant” as “Gas processing facilities in which Gas is
36 Five of the contracts provide (with minor variations in
DRIP. The Buyer shall keep reasonably clear of
obstruction all its pipelines through which said gas is
being delivered and shall own all liquids collected in
Five of the contracts provide:
DRIP, CONDENSATE AND SCRUBBER OIL. Buyer shall
keep its Gas Gathering System reasonably clear of
obstruction and shall own all drip, condensate and
scrubber oil collected in such Gas Gathering System
prior to the first stage of compression within the Plant.
37 Five contracts define “Gas Gathering System” as “the
facilities and equipment used by Buyer to gather gas.”
One contract defines “Gathering System” as “the lines
and equipment necessary to gather Gas from the
delivery point(s) and deliver it to Buyer’s Plant.”
38 According to one Dynegy witness, the consolidation
effort “decreased the amount of fuel consumption for the
producers” and “increased the amount of ethane
production for the producers and to some degree
probably a couple of percent of propane.”
39 The trial court should consider whether attorney’s
fees should be awarded in its modified judgment, and
determine the amount of such fees, if any.