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Garman v. Conoco, Inc.

Colorado Supreme Court
886 P.2d 652 (Colo. 1994)


The Garmans (plaintiffs) assigned oil and gas leases to Conoco, Inc., subject to an overriding royalty interest. After Conoco extracted the gas subject to the leases, it processed the gas into a marketable product, and then sold the gas. The lease did not state who would be responsible for post-production costs needed to transform the gas into a marketable product. For several years, Conoco deducted its post-production costs from its overriding royalty payments to the Garmans. The Garmans brought suit in the United States District Court for the District of Colorado, seeking a declaratory judgment with respect to their rights, and accounting for the costs that Conoco had deducted. The district court certified the question of how such post-production costs should be borne when the lease is silent, and specifically whether the royalty owner should have to bear such costs.

Rule of Law


Holding and Reasoning (Rovira, C.J.)

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