Marathon Oil Company v. United States
United States District Court for the District of Alaska
604 F. Supp. 1375 (1985)
Marathon Oil Company (Marathon) (plaintiff) owned working interests in certain leases of federal lands. The Mineral Management Service (MMS) (defendant) was the government agency that managed the leases. The leases required Marathon to pay a 12 and one-half percent royalty to the government “computed in accordance with [federal regulations].” The regulation stated: “The value of production, for the purpose of computing royalty, shall be the estimated reasonable value of the product as determined by the [MMS].” The regulation also stated: “Under no circumstances shall the value of production 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.” Finally, the leases stated that the Secretary of the Interior “may establish reasonable minimum values for purposes of computing royalty.” Marathon transported a portion of the gas produced from the leases to a liquefied natural gas (LNG) plant. Once liquefied, Marathon shipped the LNG to Japan where it was sold. Marathon computed royalties based on the price it was paid for the unliquefied gas. MMS issued an order changing this computation. Specifically, MMS computed the value of production by taking the sale price in Japan, subtracting liquefaction and transportation costs, and allowing for a reasonable rate of return on the LNG plant. Marathon brought suit, claiming that MMS’s order violated the regulation. Specifically, Marathon argued that the value of production should be the value of the gas when it was delivered to the LNG plant. The government moved for summary judgment.
Rule of Law
Holding and Reasoning (Fitzgerald, C.J.)
What to do next…
Unlock this case brief with a free (no-commitment) trial membership of Quimbee.
You’ll be in good company: Quimbee is one of the most widely used and trusted sites for law students, serving more than 725,000 law students since 2011. Some law schools—such as Yale, Berkeley, and Northwestern—even subscribe directly to Quimbee for all their law students.Unlock this case briefRead our student testimonials
Learn more about Quimbee’s unique (and proven) approach to achieving great grades at law school.
Quimbee is a company hell-bent on one thing: helping you get an “A” in every course you take in law school, so you can graduate at the top of your class and get a high-paying law job. We’re not just a study aid for law students; we’re the study aid for law students.Learn about our approachRead more about Quimbee
Here's why 725,000 law students have relied on our case briefs:
- Written by law professors and practitioners, not other law students. 45,600 briefs, keyed to 983 casebooks. Top-notch customer support.
- The right amount of information, includes the facts, issues, rule of law, holding and reasoning, and any concurrences and dissents.
- Access in your classes, works on your mobile and tablet. Massive library of related video lessons and high quality multiple-choice questions.
- Easy to use, uniform format for every case brief. Written in plain English, not in legalese. Our briefs summarize and simplify; they don’t just repeat the court’s language.