                       REVISED - April 24, 1998

                  UNITED STATES COURT OF APPEALS
                       FOR THE FIFTH CIRCUIT

                         ____________________

                             No. 96-60837
                         ____________________

                        RALPH E. WILLIAMSON,
                 and his wife DAPHINE WILLIAMSON,
                          LESLIE WILLIAMSON,
                      JUDY WILLIAMSON DUNAWAY,
                     BONNIE WILLIAMSON MORRIS,
                           JAMES WILLIAMSON,
                            RALPH E. THOMAS,
                             SAMMY L. SMITH,
                               S. E. SMITH,
                     ROBERT SIDNEY DOBBS, JR.,
                             FLORA R. DOBBS,
                             BOBBY G. SMITH,
                            MARION P. SMITH,
                         and GRACE M. SMITH,
          all residents of Lowndes County, Mississippi,

                                                Plaintiffs-Appellees,
                                versus

          ELF AQUITAINE, INC., a Delaware Corporation,

                                                Defendants-Appellants.


           Appeal from the United States District Court
             for the Northern District of Mississippi
                       (No. 1:93-CV-255-S-D)
_________________________________________________________________

                            April 1, 1998

Before POLITZ, Chief Judge, GARWOOD and BARKSDALE, Circuit Judges.

RHESA HAWKINS BARKSDALE, Circuit Judge:

     For this diversity action, the interlocutory appeal at hand

concerns whether, under Mississippi law, lessors/royalty owners are

entitled to royalties from the proceeds of the “nonrecoupable”

settlement of a “take-or-pay” contract between a lessee/producer

and a gas purchaser.    On cross-motions for summary judgment, the
district court held for the lessors/royalty owners. We REVERSE and

RENDER.

                                   I.

     Appellees are lessors/royalty owners under six oil, gas, and

mineral   leases   for   the   Caledonia   Field   in   Lowndes   County,

Mississippi.    Appellant, Elf Aquitaine, Inc., the lessee, drilled

and sold gas from two Caledonia Field wells.       Elf entered into two

separate purchase and sales contracts with the Tennessee Gas

Pipeline Company (TGP). Under these contracts, Elf was required to

sell, and TGP was required to buy, 90 percent of Elf’s delivery

capacity.    Among other things, these contracts contained “take-or-

pay” provisions, which required TGP to take or, if failing to take,

to in any event pay for a large minimum volume of gas that Elf made

available for delivery, and to take (recoup) the undelivered, but

paid for, gas in succeeding years.

     The term “take-or-pay” is somewhat misleading; the purchaser

always must make payment for a minimum amount of available gas, but

may exercise an option to take (recoup) the gas at a later date.

These provisions are mutually beneficial:      the producer is assured

a steady income; the pipeline company, a steady supply.

     Due to various market forces in the early 1980s, the natural

gas market experienced an increase in supply but a decrease in

demand.     Consequently, pipeline companies were in a financially

unfavorable position of being locked into long-term, take-or-pay

contracts with producers, requiring pipeline companies to purchase

at high prices large volumes of gas, which they were unable to


                                    2
resell on the flooded market.              See Koch Hydrocarbon Co. v. MDU

Resources Group, Inc., 988 F.2d 1529 (8th Cir. 1993); John S. Lowe,

Defining the Royalty Obligation, 49 SMU L. REV. 223 (1996); Bruce

M. Kramer, Liability to Royalty Owners For Proceeds from Take-or-

Pay and Settlement Payments, 15 E. MIN. L. FOUND. § 14.01 (1994).

     In 1983, due to these adverse market conditions, TGP followed

a growing trend among similarly situated pipeline companies and

unilaterally began refusing to take, much less to pay for, the full

minimum available gas amount, in clear breach of its contracts with

Elf, among others.          As a result, Elf and TGP entered into a

settlement      agreement     in    1985       (the    1985   settlement),           kept

confidential from the lessors, which resolved certain breach of

contract claims that Elf had against TGP.

     However, due to continuing market difficulties, TGP continued

in breach of contract. (For example, in December 1985, TGP advised

Elf that its gas sales at one point had been reduced to the lowest

level   since    1944.)       TGP    refused          to   meet    its    take-or-pay

obligations,     but   also    refused         to   release       the    gas   Elf    was

contractually committed to sell to TGP.                By 1987, TGP owed Elf over

$27 million in take-or-pay obligations under various contracts,

including the two involved in this case.

     Consequently, Elf and TGP entered into a second settlement

agreement in 1987 (the 1987 settlement), again kept confidential

from the lessors, under which TGP made a lump-sum payment of

approximately $6.6 million to Elf in consideration for Elf waiving

its claims under the take-or-pay contracts. No royalties were paid


                                           3
to Appellees from this settlement amount.                (The 1987 settlement

included the following language: “WHEREAS Elf has been requested by

[TGP] to reduce prospectively the price, volumes and take-or-pay

obligations of gas purchased under the Contracts....” Although the

settlement amount was entered in Elf’s books as a settlement of

take-or-pay obligations, Appellees contend that this settlement was

not solely to excuse take-or-pay obligations but to excuse all

disputes arising out of the marketing of gas under the leases.)

     In conjunction with the 1987 settlement, TGP and Elf also

amended the contracts to allow Elf to sell gas from the wells on

the open market. Such sales increased immediately, with Elf paying

Appellees full royalties from them.

     In    mid-1993,   after   becoming    aware    of    the   1985    and    1987

settlements, Appellees filed this action in Mississippi chancery

court to recover as royalties a portion of the settlement proceeds.

Elf removed the action to federal district court.

     With respect to the 1987 settlement, the district court

granted summary judgment to Appellees, denied Elf’s similar cross-

motion,    and   reserved   ruling   on   damages.         Williamson     v.   Elf

Aquitaine, Inc., 925 F. Supp. 1163, 1173-74 (N.D. Miss. 1996).

(The court held that the claim based on the 1985 settlement was

barred by limitations; Appellees do not cross-appeal.                     Id. at

1174.)

     The    district   court    certified     the    following         issue   for

interlocutory     appeal:   “whether,     pursuant    to    Mississippi        law,

lessors of a mineral interest in gas are entitled to royalties


                                     4
stemming from the nonrecoupable cash settlement of a take-or-pay

contract dispute between a pipeline and a producer”. Williamson v.

Elf Aquitaine, Inc., No. 1:93CV255-S-D, 1996 WL 671660 (N.D. Miss.

July 25, 1996) (unpublished). Our court initially denied but, upon

re-certification granted, Elf’s petition for interlocutory appeal.

Williamson v. Elf Aquitaine, Inc., No. 96-00268 (5th Cir. Dec. 5,

1996) (unpublished).

                                 II.

                                 A.

     Appellees/lessors   seek   certification   to    the   Mississippi

Supreme Court.

               In determining whether to exercise our
          discretion in favor of certification, we
          consider many factors. The most important are
          the closeness of the question and the
          existence of sufficient sources of state law —
          statutes,    judicial   decisions,    attorney
          general’s opinions — to allow a principled
          rather than conjectural conclusion. But also
          to be considered is the degree to which
          considerations of comity are relevant in light
          of the particular issue and case to be
          decided. And we must also take into account
          practical limitations of the certification
          process:   significant  delay   and   possible
          inability to frame the issue so as to produce
          a helpful response on the part of the state
          court.

State of Fla. ex rel. Shevin v. Exxon Corp., 526 F.2d 266, 274-75

(5th Cir. 1976).

     Appellees contend that certification is proper because the

issue at hand has not been addressed by the Mississippi Supreme

Court and judicial economy would be served.          But, as discussed

infra, Mississippi case law, which looks to Texas decisions in oil


                                  5
and gas cases, is sufficiently clear to allow this court to decide

the issue presented.       Needless to say, “[c]ertification is not a

panacea for resolution of those complex or difficult state law

questions which have not been answered by the highest court of the

state”. Transcontinental Gas Pipeline Corp. v. Transportation Ins.

Co., 958 F.2d 622, 623 (5th Cir. 1992).

      In short, this appeal does not fall within the class of

“exceptional” cases requiring certification.            See, e.g., Lavespere

v. Niagara Mach. & Tool Works, Inc., 920 F.2d 259, 262 (5th Cir.

1990).      Accordingly, certification is DENIED.

                                       B.

      Of course, we review a summary judgment de novo.               E.g., FDIC

v. Myers, 955 F.2d 348, 349 (5th Cir. 1992).            In this regard, the

parties stipulated in district court that no material fact issues

exist.   Therefore, at issue is whether, under Mississippi law, the

Appellees are entitled to royalties from the proceeds of the

nonrecoupable 1987 settlement of the take-or-pay contracts between

Elf   and    TGP.    (As   discussed       infra,   under   a    “nonrecoupable

settlement”, there is a termination of the pipeline company’s right

to take gas not taken prior to settlement.)                     Again, for this

summary judgment, as in all instances where we are presented with

an issue of law, see Thompson v. City of Starkville, 901 F.2d 456,

459 (5th Cir. 1990), we review de novo.

      For this diversity action, and because the Mississippi Supreme

Court has not addressed this issue, we are required to make an

Erie-guess as to how the Mississippi courts would apply state


                                       6
substantive law.    Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938);

e.g., Southwestern Engineering v. Cajun Elec. Power Co-op., Inc.

915 F.2d 972, 978 (5th Cir. 1990).        In this regard, deference

cannot be given to the rulings by the district court, even though

it sits in the State whose law is being applied.       Salve Regina

College v. Russell, 499 U.S. 225, 238 (1991) (“When de novo review

is compelled, no form of appellate deference is acceptable.”).

     Prior to launching this de novo/non-deferential exploration,

we note, in fairness to the able district court, that some of the

key decisions it looked to as bases for its most comprehensive

opinion have subsequently been reversed.    In sum, we are exploring

ground altered after the district court ruled.

                                 1.

     Under Mississippi law, as in general, implied covenants are

inapplicable when a contract contains express provisions on that

particular issue.   Lloyd’s Estate v. Mullen Tractor & Equip. Co.,

4 So. 2d 282, 287 (Miss. 1941).       Therefore, absent ambiguities,

Mississippi gives effect to the plain language of the lease, which

represents the agreed understanding between the parties.    Superior

Oil Co. v. Beery, 63 So. 2d 115, 118 (Miss. 1953).   Accordingly, we

look first to that plain language.

     Concerning Elf’s royalty obligations to Appellees, five of the

leases state:

               As royalty, lessee covenants and agrees:
          ... (b) To pay lessor on gas and casinghead
          gas produced from said land (1) when sold by
          lessee, one-eighth of the amount realized by
          lessee, computed at the mouth of the well, or
          (2) when used by lessee off said land or in

                                 7
            the manufacture of gasoline or other products,
            the market value, at the mouth of the well, of
            one-eighth of such gas and casinghead gas....

(Emphasis added.)    The sixth lease has substantially similar

language:

                 Royalties to be paid by lessee are: ...
            (b) on gas, including casinghead gas or other
            gaseous substance[s], produced from said land
            and sold or used, the market value at the well
            of one-eighth (1/8) of the gas so sold or
            used, provided that on gas sold at the well
            the royalty shall be one-eighth (1/8) of the
            amount realized from such sales....

(Emphasis added.)

     Applying Mississippi law, our court’s decision in Piney Woods

Country Life School v. Shell Oil Co., 726 F.2d 225 (5th Cir. 1984),

cert. denied, 471 U.S. 1005 (1985), concerned royalty provisions

virtually identical to those at hand.             We held that “production”

for the purposes of a royalty-bearing oil and gas lease occurs when

the gas is brought to the surface and “severed from the land”.                Id.

at 234; cf. Diamond Shamrock Exploration Co. v. Hodel, 853 F.2d

1159, 1165 (5th Cir. 1988).       Elf contends that the plain language

of the leases requires payment of royalties only when gas has been

“produced” and “sold”.     Appellees focus on the “amounts realized”,

contending   that   Elf   “realized”       two   prices   for   the   gas   that,

subsequent to the 1987 settlement, it produced and sold:                    first,

the lump-sum, nonrecoupable settlement “price” for the gas it would

later produce; and second, the spot market prices from the sale of

the same gas when actually produced.               (Based on statements by

counsel at oral argument here, as well as Appellees’ statement of

facts in the pretrial order, it appears that TGP purchased little,

                                       8
if any, of the gas that, post-1987 settlement, was produced and

sold.)

     Mississippi courts give little guidance on a lessee’s royalty

obligations in the settlement of a take-or-pay dispute.           However,

for oil and gas issues of first impression, the Mississippi Supreme

Court has long held that it will typically follow decisions of the

Texas courts, depending, of course, on “the soundness of the

reasoning by which they are supported”.       Phillips Petroleum Co. v.

Millette, 72 So. 2d 176, 182 (Miss. 1954).

     Texas courts have dealt extensively with the question of when

royalties are to be paid in the context of take-or-pay provisions.

In a seminal case, Killam Oil Co. v. Bruni, 806 S.W.2d 264 (Tex.

App.--San Antonio 1991, writ denied) (Bruni I), the Texas Court of

Appeals held that lessors are not entitled to royalties on proceeds

from the settlement of a take-or-pay contract. That decision keyed

on the fact that the lease, which is virtually identical to one of

the leases at issue here, entitled the lessor to royalty payments

for gas “produced”, whereas take-or-pay settlement proceeds involve

payments for gas not produced.

     However,    especially    for    “nonrecoupable   settlements”,   the

holding in Bruni I was arguably called into question in Hurd

Enterprises, Ltd. v. Bruni, 828 S.W.2d 101, 106-07 n.8 (Tex. App.--

San Antonio 1992, writ denied) (Bruni II), which stated, in dicta,

that “there are cogent arguments concerning the royalty owner’s

interest in take-or-pay settlement funds, especially when, as here,

the settlement    terminates    the    purchaser’s   recoupment   rights.”


                                      9
(Emphasis added.)   Again, a “nonrecoupable settlement”, as in the

case at hand, occurs when the settlement terminates the pipeline

company’s “make-up” rights (i.e., the right to later take gas not

taken during the prior period covered by the settlement).        See

Bruni II, 828 S.W.2d at 106 n.8.

     This question was resolved in TransAmerican Natural Gas Corp.

v. Finkelstein, 933 S.W.2d 591 (Tex. App.--San Antonio 1996, writ

denied) (en banc) (Finkelstein II); the court found no distinction

between recoupable and nonrecoupable settlements, holding that “the

royalty owner, who does not shoulder the risks of exploration,

production, and development, should not share in the take-or-pay

payment”.   Id. at 599 (citing Diamond Shamrock, 853 F.2d at 1167)

(quotation and ellipsis omitted).     The court stated: “we reaffirm

our decision in Bruni I and clarify that a royalty owner, absent

specific lease language, is not entitled to take-or-pay settlement

proceeds, whether or not gas is sold to third parties on the spot

market”.    Finkelstein II, 933 S.W.2d at 600.

     Moreover, Finkelstein II held that the “cogent arguments”

listed in the dicta in Bruni II had “been resolved by Lenape’s

explanation that take-or-pay payments [do not] represent ... the

mere ‘pre-payment’ of gas suggested by [the Finkelstein I panel

opinion withdrawn by Finkelstein II]”.     933 S.W.2d at 599 (citing

Lenape Resources Corp. v. Tennessee Gas Pipeline Co., 925 S.W.2d

565, 571-72 (Tex. 1996)). Turning around the “Elf will receive two

payments” argument presented here by Appellees, the court noted

that, if royalties were required to be paid on the compromise of a


                                 10
dedication claim, the royalty owner would receive “two royalties on

the same gas, a right to which he was not entitled under the terms

of his lease”.   Id.

     Similarly, Independent Petroleum Association of America v.

Babbit, 92 F.3d 1248 (D.C. Cir. 1996), states:

          [T]here is no meaningful distinction between a
          settlement payment and a recoupable take-or-
          pay payment in that no gas is actually
          produced in either case. ... The link between
          the funds on which royalties are claimed and
          the actual production of gas is missing.

          ....

               [W]hen the payments (of either variety)
          are nonrecoupable, the funds are never linked
          to any severed gas. Therefore, no royalties
          accrue on those payments.

Id. at 1259-60 (footnote omitted).

     Other recent Texas cases have followed Finkelstein II and

further clarify the state of the law in Texas on the issue of

royalty obligations vel non in conjunction with nonrecoupable

settlements.

     Alameda Corp. v. TransAmerican Natural Gas Corp., 950 S.W.2d

93, 97 (Tex. App.--Houston [14th Dist.] 1997, writ denied), held

that repudiation damages are not royalty-bearing when, as in the

case at hand, royalty obligations are tied to production.    In so

holding, the court stated that “a royalty owner’s right to payment

under these circumstances is no longer an open question in Texas”.

Id. at 99 (citing Bruni II and Lenape).

     And, Condra v. Quinoco Petroleum, Inc., 954 S.W.2d 68 (Tex.

App.--San Antonio 1997, n.w.h.), relied on Bruni II, Finkelstein


                                11
II, and Alameda in holding that proceeds from a nonrecoupable take-

or-pay settlement are not royalty-bearing:

                  Similar   to  the   repudiation   damages
             considered    in   [Finkelstein    II],    the
             nonrecoupable payment in the instant case was
             not paid for production. Therefore, we hold
             that the appellants’ division orders do not
             entitle them to royalties on the take-or-pay
             settlement in this case.

Id. at 71.

     The state of the law in Texas is clear: absent specific lease

language, royalty owners are not entitled to proceeds from take-or-

pay settlements, whether recoupable or nonrecoupable.            Accord

Condra, 954 S.W.2d at 71; Alameda, 950 S.W.2d at 97-99; Finkelstein

II, 933 S.W.2d at 597-600.        Obviously, Texas case law is not

binding on Mississippi courts; but, as noted, it is typically

followed by them in oil and gas issues of first impression.

Phillips Petroleum, 72 So. 2d at 182.

     The reasoning evinced in these Texas opinions is sound and

consistent with the limited Mississippi law precedent.        See, e.g.,

Piney Woods, 726 F.2d at 234 (holding that, under Mississippi law,

“a gas sale contract is executory and that the sale is executed

only upon production and delivery”) (citing MISS. CODE ANN. § 75-2-

105, et seq.); Palmer v. Crews, 35 So. 2d 430, 435 (Miss. 1948)

(stating that a royalty “consists of a share in the oil and gas

produced.    It does not include a perpetual interest in the oil and

gas in the ground”.).     Accordingly, that reasoning applies here.




                                  12
                                     2.

     Equitable considerations do not come into play. As discussed,

it is well-established in Mississippi that implied covenants are

inapplicable when, as here, an issue is expressly covered by the

language in a lease.       Lloyd’s Estate, 4 So. 2d at 287 (“An express

covenant upon a given subject ... excludes the possibility of an

implied   covenant    of   a   different   or   contradictory   nature.”).

Similarly, “[a]s we stated in Bruni I, the royalties to which a

lessor is entitled must be determined from the provisions of the

oil and gas lease”.    Finkelstein II, 933 S.W.2d at 597.       Therefore,

we follow Finkelstein II:

                Like the lease in Bruni I, [the royalty
           owner]’s lease is tied to production. By this
           language, [the royalty owner] unambiguously
           limited his right to royalty payments from gas
           actually    extracted     from    the    land.
           Additionally,    without    production,   [the
           lessor]’s duty to reasonably market was not
           triggered.

933 S.W.2d at 598 (internal citation and footnote omitted).

     Appellees do not claim to be third-party beneficiaries of the

take-or-pay contracts between Elf and TGP.          See Mandell v. Hamman

Oil and Refining Co., 822 S.W.2d 153 (Tex. App.--Houston [1st

Dist.] 1991, writ denied); Gerard J.W. Bos & Co., Inc. v. Harkins

& Co., 883 F.2d 379, 382 (5th Cir. 1989) (applying Mississippi

law).   And, Appellees do not contend that the 1987 settlement was

in bad faith or less than an arms-length transaction.

     On the other hand, they do note that, in addition to a claimed

implied duty to market, the leases provide that “[l]essee covenants

and agrees to use reasonable diligence to produce, utilize, or

                                     13
market the minerals capable of being produced from said wells”.

But, as discussed above, and as stated in Finkelstein II, “[t]ake

or pay is not a benefit which flows from the marketing covenant of

a lease”.   933 S.W.2d at 600.   Furthermore, Appellees do not claim

that, post-1987 settlement, Elf has not complied with its express

marketing obligation.

                                 III.

       In Piney Woods, this court held that, under Mississippi law,

the provisions in the lease controlled, even though, in that case,

the gas producer was economically disadvantaged.    726 F.2d at 237-

38.    This time, it appears that it is the royalty owners who are

adversely affected by the enforcement of the lease.     The summary

judgment is REVERSED, and judgment is RENDERED for Elf Acquitaine,

Inc.

                                         REVERSED and RENDERED




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