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Apache Corp. v. W&T Offshore, Inc.

ELR Citation: 40 ELR 20020
Nos. No. 09-31122, (5th Cir., 11/16/2010)

The Fifth Circuit held that a "farmout agreement," under which the owner of a federal offshore oil and gas lease transferred its rights to drill to another drilling operator, does not require the operator to bear a proportionate share of the costs of decommissioning an oil platform at the lease site. The lease owner's construction of the term "platform costs"—that it includes "all costs attributable to the platform from cradle to grave, construction to dismantlement"—is unsupported by the agreement. The term includes only fixed, startup costs of constructing a well, not speculative operational expenses.