[00:00:00] Speaker 03:
All right, 23-8073 Wildcat Coal versus Pacific Minerals, Mr. Yount.

[00:00:07] Speaker 02:
Yes, thank you, Your Honor.

[00:00:08] Speaker 02:
May it please the Court, Josh Yount, for the appellants, which I'll call Bridger.

[00:00:13] Speaker 02:
I'd like to reserve three minutes for rebuttal.

[00:00:16] Speaker 02:
The district court committed several serious errors in granting Wildcat summary judgment and awarding it a $20 million advance royalty in this coal mining lease case.

[00:00:25] Speaker 02:
The plain language of the applicable nine mile lease, together with the undisputed surrounding circumstances, preclude any advance royalty and call for reversing the judgment below.

[00:00:36] Speaker 04:
So it sounds like you want to discuss this case sort of

[00:00:41] Speaker 04:
In New Mexico, we would call it the contextual approach to contract interpretation.

[00:00:46] Speaker 02:
Yes, Your Honor, although we have very strong plain language arguments that would allow us to prevail without looking to the context.

[00:00:56] Speaker 02:
But the context outside of the contract also supports our plain language reading and confirms it.

[00:01:03] Speaker 04:
OK, so to get to the context, would we have to have a determination

[00:01:10] Speaker 04:
that the plain language contains some type of ambiguity or that it was unclear in some way.

[00:01:17] Speaker 02:
No, not under Wyoming law.

[00:01:20] Speaker 02:
Wyoming law provides that surrounding circumstances can be examined, even in circumstances where the language or a particular provision is clear and unambiguous.

[00:01:33] Speaker 02:
Cases like Hickman, and ecosystems, and M&M Auto all point in that direction.

[00:01:44] Speaker 04:
Before you move on, would you give us just a background?

[00:01:47] Speaker 04:
How has the progress of mining this coal mine progressed over the years?

[00:01:52] Speaker 04:
Did it start in the nine mile area and move away from it?

[00:01:56] Speaker 04:
Is that what's happened out there?

[00:01:58] Speaker 02:
Yes, more or less.

[00:01:59] Speaker 02:
So mining began in 1969 under a prior lease.

[00:02:04] Speaker 02:
This was back when it was Union Pacific and Pacific Minerals.

[00:02:12] Speaker 02:
And then in 1986, they restated the lease.

[00:02:16] Speaker 02:
All this while, the Nine Mile Lands and the

[00:02:19] Speaker 02:
adjoining government lands in what's called the Nine Mile Draw were being mined, right?

[00:02:25] Speaker 02:
And that continued after 1986.

[00:02:28] Speaker 02:
And in the early years of the 1986 lease, most of the bulk of the mining was done on the private RSRC or Anadarko-owned lands in that Nine Mile Draw, right?

[00:02:42] Speaker 02:
And that's how the sort of large credit

[00:02:46] Speaker 02:
crude in those early years of the 1986 lease.

[00:02:50] Speaker 02:
And then by the time you get to the 2000 timeframe, most of the coal has been mined out of those areas.

[00:03:01] Speaker 02:
Largely it has, and they're ready to move beyond the original borders.

[00:03:04] Speaker 02:
And so then they

[00:03:05] Speaker 02:
They look to the north and consider the 10-mile lease.

[00:03:10] Speaker 02:
But because of the depth of the coal seam, they determine that that needs to be underground.

[00:03:15] Speaker 02:
And very tellingly, they don't proceed then under the 9-mile lease.

[00:03:20] Speaker 02:
The parties conclude that they need to enter a new lease to authorize underground mining, even on the areas that were

[00:03:29] Speaker 02:
within the nine mile lease area, because some of those areas ended up being underground mined.

[00:03:34] Speaker 04:
So if we did an overlay of the ten mile lease and the nine mile lease, there would be some overlap.

[00:03:42] Speaker 02:
Yes, that's absolutely right.

[00:03:44] Speaker 02:
You can see that in the map at the end of the

[00:03:47] Speaker 02:
at the end of the addendum in that sort of northwest portion, there is some crosshatching and that is what indicates that there is overlap.

[00:03:57] Speaker 02:
This would be addendum page 89.

[00:03:59] Speaker 02:
Should I move on, Your Honors?

[00:04:13] Speaker 02:
Go ahead.

[00:04:14] Speaker ?:
Sorry.

[00:04:16] Speaker 02:
So I'd like to start, unless Your Honors would prefer me to start somewhere else, with the district court's refusal to apply the protest period provision in section 6D of the nine mile lease.

[00:04:29] Speaker 02:
Under that provision, which you can see at addendum pages 49 and 50, royalty payments and supporting accountings and statements must be conclusively presumed true and correct, if not protested within three years.

[00:04:46] Speaker 02:
From the commencement of the lease through 2020, Bridger consistently paid production royalties, but no advance royalties.

[00:04:53] Speaker 02:
It consistently provided coal production data for the Bridger mine that included all of the parts of it.

[00:05:04] Speaker 02:
And RSRC and Anadarko never protested.

[00:05:11] Speaker 04:
So in the data that they were providing, so say from 1986 to 1991, if I looked at that, would I be able to tell how much came out of the nine mile lease and how much came from outside of the nine mile lease?

[00:05:27] Speaker 02:
Yes.

[00:05:28] Speaker 02:
I mean, in 1986, it would have only been the government lands and the private lands within the nine mile lease.

[00:05:34] Speaker 02:
It wasn't until the 2000s that you start to see other private lands being mined.

[00:05:40] Speaker 04:
I got you.

[00:05:40] Speaker 04:
So when the nine mile lease was consummated, you had the nine mile fee lands, and then the royalty agreement had to do with what happened if

[00:05:56] Speaker 04:
they mined out of the federal and state permits.

[00:05:59] Speaker 04:
At that time, there were no additional private leases.

[00:06:02] Speaker 02:
That's correct, Your Honor.

[00:06:04] Speaker 02:
And in fact, in 1997, when they wanted to add some lands, they added them to the Rock Springs lands under the nine-mile lease by amendment.

[00:06:17] Speaker 02:
So that was the process.

[00:06:20] Speaker 02:
And then they got to the 10-mile lease.

[00:06:22] Speaker 02:
And for reasons I explained, they did a separate lease.

[00:06:27] Speaker 03:
But since you never paid an advance royalty, there was really never an occasion for Wildcat to examine the books.

[00:06:37] Speaker 03:
You just offered the royalty.

[00:06:38] Speaker 03:
They could have protested or examined.

[00:06:40] Speaker 03:
They didn't.

[00:06:41] Speaker 03:
But you never offered an advance royalty, so there was no reason for them to examine the underlying legitimacy of that payment.

[00:06:51] Speaker 02:
Well, there was, Your Honor, because there is this credit accruing, and the credit depends on how much is coming from adjoining lands.

[00:07:01] Speaker 02:
And so it was very much in RSRC and Anadarko's interest to object if our accounting of the coal production coming from adjoining lands was incorrect.

[00:07:13] Speaker 04:
Well, this credit accruing idea, though, never came up until basically this dispute, did it?

[00:07:21] Speaker 04:
your client paid a 45% in lieu of royalty, let's call it.

[00:07:30] Speaker 04:
And they weren't even considering the fact that there could have been a credit accruing in the past at that time.

[00:07:37] Speaker 04:
Isn't that right?

[00:07:38] Speaker 02:
Well, there was a mistake made by the person who initially calculated that in 2001.

[00:07:44] Speaker 04:
I mean, they were your client.

[00:07:47] Speaker 04:
They didn't apply a credit that

[00:07:50] Speaker 04:
accrued back to 1986?

[00:07:53] Speaker 02:
Well, when they first calculated it, the person who did it, he made a mistake, and he did not accrue it.

[00:08:00] Speaker 02:
When the issue was revisited, as the parties discussed, the issue, our client concluded that it was appropriate to apply the credit and then did apply the credit.

[00:08:15] Speaker 02:
To go back to the oil.

[00:08:17] Speaker 04:
I mean, you see the issue with that, though.

[00:08:19] Speaker 04:
Well, you want to criticize them for not complaining that the credit was calculated wrong in the past when, I mean, the only time it was ever even looked at many years later, your client didn't even consider the fact that there was a credit.

[00:08:34] Speaker 04:
And you call it a mistake.

[00:08:35] Speaker 04:
I mean, for whatever reason, they didn't consider it.

[00:08:39] Speaker 04:
Did you have, if we looked at some discovery

[00:08:42] Speaker 04:
of some sort would we see in your client's books this credit being carried forward all these years?

[00:08:49] Speaker 04:
Or was that calculated after the erroneous payment?

[00:08:54] Speaker 02:
The record doesn't reveal a calculation of the sort that you're talking about, Your Honor.

[00:09:00] Speaker 02:
But I'd like to make two points about that.

[00:09:02] Speaker 02:
First is that the protest period provision does not

[00:09:07] Speaker 02:
depend on whether one of the parties made a mistake or didn't make a mistake.

[00:09:13] Speaker 02:
In fact, exists to close off disputes about whether there was a mistake made in the past.

[00:09:19] Speaker 04:
That's fine.

[00:09:19] Speaker 04:
I mean, does the protest period apply to your clients as well?

[00:09:22] Speaker 02:
Yes, it does.

[00:09:23] Speaker 04:
OK, so if they didn't assert a credit in the past, then they lose that credit going forward because they didn't

[00:09:38] Speaker 02:
There's no evidence that the credit wasn't asserted in the past.

[00:09:43] Speaker 02:
But there's no evidence that it was.

[00:09:46] Speaker 02:
Well, there is the evidence, though, that is crucial, which is that the parties always treated

[00:09:55] Speaker 02:
the adjoining lands as being limited to government surface mined lands, and that Anadarko and RSRC received this data about how much was coming from adjoining lands.

[00:10:10] Speaker 02:
They audited that data.

[00:10:12] Speaker 02:
They discussed it with Bridger.

[00:10:14] Speaker 02:
And they never protested the amount that Bridger was attributing to adjoining lands.

[00:10:20] Speaker 01:
Did you actually, every five years, do this calculation

[00:10:25] Speaker 01:
And when you say they had the data, did you provide them with the calculation every five years on the advance royalty and say, here's the calculation, here's how we determined it, and by the way, we don't owe you any advance royalty?

[00:10:43] Speaker 02:
Did they have that?

[00:10:46] Speaker 02:
The way it worked in practice, and you can see this in the affidavit and declarations, is that in the auditing process, they reviewed whether within the five-year period, the 45% threshold was satisfied.

[00:11:02] Speaker 02:
Who's they?

[00:11:02] Speaker 02:
Bridger and Anadarko.

[00:11:04] Speaker 02:
Both.

[00:11:04] Speaker 02:
Both.

[00:11:07] Speaker 02:
And they both concluded for each five-year period that the 45% threshold had been satisfied.

[00:11:14] Speaker 02:
As a result,

[00:11:15] Speaker 02:
If it's satisfied for every five-year period, it's necessarily satisfied over the course of the lease.

[00:11:23] Speaker 02:
And therefore, no advanced royalty would be due.

[00:11:25] Speaker 01:
So what you're saying is, in order for them to agree, they would have had to have been in agreement on what adjoining lands consisted of.

[00:11:32] Speaker 01:
Yes.

[00:11:33] Speaker 01:
And that's what's- Doesn't really have anything to do with whether there's a credit or not.

[00:11:36] Speaker 01:
They had to be in agreement about figures or the calculations that were going into that equation.

[00:11:42] Speaker 02:
That's right.

[00:11:43] Speaker 02:
You don't need to get to the credit.

[00:11:45] Speaker 02:
The credit never needed to be calculated at that point.

[00:11:48] Speaker 02:
What matters, for purposes of the conclusive presumption, is that they received the underlying data from all of these different sections.

[00:11:57] Speaker 02:
And they reached a conclusion that the adjoining lands were the- Did they really receive data?

[00:12:09] Speaker 03:
They just received a statement from Bridger saying, no advanced royalties due.

[00:12:15] Speaker 03:
And they trusted that representation.

[00:12:18] Speaker 02:
No, they received the data.

[00:12:20] Speaker 03:
Underlined mining data?

[00:12:21] Speaker 02:
Yes, and they audited it.

[00:12:22] Speaker 02:
And that's also in the affidavits and declarations.

[00:12:25] Speaker 02:
I see that I'm into my rebuttal time, Your Honors.

[00:12:30] Speaker 04:
Let me joust with you just a bit more.

[00:12:34] Speaker 04:
So just about this credit.

[00:12:36] Speaker 04:
You still want the credit.

[00:12:38] Speaker 04:
You're saying we don't have to focus on the credit, but you still want the credit.

[00:12:43] Speaker 04:
You want the credit insofar as it wipes out the $2.9 million, don't you?

[00:12:48] Speaker 04:
Yes.

[00:12:50] Speaker 04:
We do have to get into the credit, at least insofar as it goes to that.

[00:12:56] Speaker 02:
I think the credit follows from how you decide the protest period and how you decide the adjoining lands issue.

[00:13:03] Speaker 02:
The credit is just a mathematical calculation that follows from those determinations of how to read the contract.

[00:13:14] Speaker 01:
If we were to decide the 6D issue in your favor, my understanding is you're agreeing that even under the adjoining lands definition that the opposing side offers, you still would not owe anything.

[00:13:32] Speaker 02:
That's correct.

[00:13:33] Speaker 01:
And so do we need to reach that adjoining lands issue?

[00:13:37] Speaker 02:
So for 2020, no advanced royalty would be owed.

[00:13:43] Speaker 02:
There is a request for declaratory relief in the complaint.

[00:13:48] Speaker 02:
And the definition of adjoining lands would matter for how the advanced royalty calculation would operate going into the future for periods after 2015.

[00:14:01] Speaker 03:
Would Wildcat be entitled to challenge the underlying data going back to 1986 for purposes of the advanced royalty credit?

[00:14:13] Speaker 02:
No.

[00:14:14] Speaker 02:
That's how Section 6D operates.

[00:14:18] Speaker 02:
Section 6D would have no purpose if they could at any point in, say, 2025 challenge the production data for 1986 to 1990.

[00:14:26] Speaker 02:
Now, they can challenge what's happened since

[00:14:31] Speaker 03:
I'll give you a little rebuttal time.

[00:14:32] Speaker 03:
But how does that follow if, based on Judge Carson's question, you're entitled to go back and recreate the credit, which doesn't sound like it was an ongoing accounting method.

[00:14:45] Speaker 03:
But Wildcat's not entitled to challenge that underlying math?

[00:14:49] Speaker 02:
We're not entitled to go back and change the credit for prior years, just as we're not allowed to go back and change the coal production for prior years.

[00:14:58] Speaker 02:
And all we're asking, just to be clear, I'm sorry if my answers to Judge Carson were not as clear as they could have been, what we're asking

[00:15:10] Speaker 02:
be conclusively presumed true and correct are the figures used for adjoining lands from 1986 to 2015.

[00:15:20] Speaker 04:
Can I ask you one more question?

[00:15:22] Speaker 02:
Yeah.

[00:15:22] Speaker 04:
So this has to do with your textual argument.

[00:15:25] Speaker 04:
Or actually, it's not very textual about what is adjoining lands, how you want to limit adjoining lands to contiguous state or federal lands.

[00:15:37] Speaker 00:
Yes.

[00:15:38] Speaker 04:
Right?

[00:15:40] Speaker 04:
And but there's no textual.

[00:15:45] Speaker 04:
I mean, actually, you do have some argument about how you think it's textual.

[00:15:48] Speaker 04:
But if at the time that the Nine Mile Lease was entered into, there were no additional private lands that had been leased.

[00:15:58] Speaker 04:
And so I mean,

[00:16:00] Speaker 04:
Doesn't that make a difference when we're looking at this text?

[00:16:03] Speaker 04:
You say, well, there were only state and federal lands, so that's all we could have been talking about.

[00:16:09] Speaker 04:
But it's contemplating future acquisitions.

[00:16:13] Speaker 04:
And at the time you entered the lease, there were no private acquisitions yet.

[00:16:17] Speaker 04:
Those came in the future.

[00:16:18] Speaker 04:
So isn't there a good argument that the text anticipates these private lands coming in under this?

[00:16:27] Speaker 02:
No, Your Honor, I think it actually points the other way, because all of the surrounding private lands were owned by the lesser at that time and had always since been owned by the lesser.

[00:16:36] Speaker 02:
And so the purpose of the advanced royalty is to give the lesser compensation if Bridger focuses mining on lands not owned by the lesser, in other words, government lands.

[00:16:48] Speaker 02:
So if the lesser owns the lands and those lands later come into the mine or become mined,

[00:16:55] Speaker 02:
the lessor can negotiate at that time the terms of production royalties for those new leases.

[00:17:03] Speaker 02:
And that's what happened with the 10 mile, Section 11, Section 25.

[00:17:07] Speaker 03:
If the lesser sold the land to private parties, wouldn't it still anticipate those being considered adjoining lands?

[00:17:13] Speaker 02:
Sorry, Your Honor.

[00:17:14] Speaker 02:
I missed the beginning of your question.

[00:17:16] Speaker 03:
If the lesser sold some of those lands to a private entity,

[00:17:20] Speaker 02:
There's no reason to think that in 1986, RSRC was anticipating that it was going to sell some of the lands, that they would then later come into production, and that it wanted to account for those in the lease.

[00:17:35] Speaker 02:
There's just no evidence of that, and there's no reason to believe that they wouldn't have assumed that the status quo ante would continue forward and drafted the lease accordingly.

[00:17:46] Speaker 03:
And then before you sit down, why doesn't the nine-mile lease encompass underground mining?

[00:17:54] Speaker 03:
Why wouldn't that be attributable to that lease?

[00:17:57] Speaker 02:
A couple of reasons, Your Honor.

[00:17:59] Speaker 02:
There is nothing in the nine-mile lease that authorizes underground mining.

[00:18:03] Speaker 02:
I know it refers to subsurface mining, but subsurface activities are different than underground mining.

[00:18:12] Speaker 02:
In fact, if you look at the 1969 lease, which

[00:18:16] Speaker 02:
forbids underground mining, it allows subsurface activities in support of surface mining, which is the same kind of language that you see in the nine-mile lease.

[00:18:26] Speaker 02:
Beyond that, you have the course of performance of the parties, where they never did underground mining under the nine-mile lease.

[00:18:31] Speaker 02:
And they always considered underground mining to be outside of the nine-mile lease.

[00:18:36] Speaker 02:
And that's why they had to enter into a new lease to authorize underground mining.

[00:18:40] Speaker 03:
And when did the 10-mile lease authorize?

[00:18:43] Speaker 02:
The 10-mile lease was executed in 2003.

[00:18:46] Speaker 03:
All right, we aid into your rebuttal time.

[00:18:48] Speaker 03:
We apologize for that.

[00:18:49] Speaker 03:
I'll give you a minute.

[00:18:50] Speaker 03:
Thank you, Your Honor.

[00:18:51] Speaker 03:
Let's hear from Wildcat.

[00:18:55] Speaker 00:
Good morning and may please the Court.

[00:18:56] Speaker 00:
Leslie Bruckner for Appellee Wildcat Cole.

[00:19:00] Speaker 00:
To resolve this case, the Court need not and indeed may not look further than the plain language of the nine-mile lease, which is clear both as to the definition of adjoining lands

[00:19:13] Speaker 00:
And as to the availability of the Section 6D relief that Bridger only raised after the district court had not only found summary judgment but then amended its order in response to our motion.

[00:19:28] Speaker 01:
That made total sense because this was the district court's idea that Sue Esponte came up with this concept.

[00:19:36] Speaker 01:
And how would they have had any opportunity to anticipate that the district court was going to do this

[00:19:42] Speaker 01:
in ruling on summary judgment.

[00:19:45] Speaker 00:
I disagree, Your Honor, that the district court's sua sponte came up with this concept of having Bridger recalculate its compliance with the 45% projection threshold based on the new correct definition of adjoining lands.

[00:19:59] Speaker 01:
Going back to the beginning of the contract?

[00:20:03] Speaker 00:
It was Bridger's position, which we opposed in the district court, that for purposes of determining compliance with the 45% threshold,

[00:20:12] Speaker 00:
Bridger was entitled to go back to the beginning of the lease in 1986.

[00:20:16] Speaker 00:
And we said that was incorrect.

[00:20:18] Speaker 00:
But the district court agreed with Bridger.

[00:20:21] Speaker 00:
And given that position, it made perfect sense that when the district court agreed with us as the definition of adjoining lands, it was only fair and correct that Bridger be required to recalculate.

[00:20:35] Speaker 01:
We're talking about Section 6D here and the fact that the district court on its own made this determination.

[00:20:44] Speaker 01:
Neither party had an opportunity to argue about 6D, which clearly may have some impact here.

[00:20:49] Speaker 01:
And when it was raised, the district court just said, yeah, no, I don't think that's really relevant and didn't even have you all

[00:20:59] Speaker 01:
file a response.

[00:21:01] Speaker 01:
So there's just nothing here to develop the 6D argument.

[00:21:05] Speaker 00:
With respect, Your Honor, I strongly disagree that Bridger didn't have an opportunity to talk about Section 6D.

[00:21:11] Speaker 01:
It can and should have raised it.

[00:21:13] Speaker 01:
Let's go on past the judge's question.

[00:21:17] Speaker 01:
Let's get past the waiver argument.

[00:21:18] Speaker 00:
Let's get past the waiver argument.

[00:21:19] Speaker 00:
I was just going to suggest that, Your Honor.

[00:21:20] Speaker 00:
Thank you.

[00:21:21] Speaker 00:
So assuming the argument was not waived,

[00:21:25] Speaker 00:
The argument lacks merit because Section 60 was never triggered in this case.

[00:21:31] Speaker 00:
Now, as some of the judge's questions revealed, and Bridger admits, there were no advanced royalty payments made in this case prior to 2021.

[00:21:41] Speaker 00:
Now, let's look at the language of Section 60.

[00:21:45] Speaker 00:
It's triggered by a royalty payment.

[00:21:48] Speaker 00:
And it says, in particular, and I'm reading from the appendix at 39 to 40,

[00:21:55] Speaker 00:
Acceptance of any royalty payment under this lease shall not prejudice the right of lessor to protest or question the correctness thereof.

[00:22:03] Speaker 00:
Provided, however, each such payment made to lessor or any statement or accounting in support thereof shall be presumed conclusively to be true and correct unless the lessor objects."

[00:22:18] Speaker 00:
Well, there was no statement made.

[00:22:21] Speaker 00:
There was no statement made.

[00:22:23] Speaker 00:
or statements or accountants made in support of an advance royalty payment, because there never was one.

[00:22:28] Speaker 00:
Now, Mr. Nagel, if I just may.

[00:22:30] Speaker 00:
Let me ask the question.

[00:22:31] Speaker 00:
Please.

[00:22:32] Speaker 00:
Yes.

[00:22:32] Speaker 00:
Excuse me.

[00:22:33] Speaker 01:
We did hear that the parties made this decision together every five years.

[00:22:38] Speaker 01:
This was an agreed upon process, whether advance royalty payments were due.

[00:22:42] Speaker 01:
The data was provided, everybody had to agree to it, and you moved on.

[00:22:46] Speaker 01:
Why isn't that exactly what Section 60 anticipates?

[00:22:50] Speaker 01:
You've got to have some finality.

[00:22:52] Speaker 00:
First of all, Your Honor, there's nothing in the record to actually support that contention aside from the self-serving statements and affidavits provided by Bridger.

[00:23:01] Speaker 00:
We asked Bridger to provide any information they had in their possession to support their contentions.

[00:23:07] Speaker 01:
Well, again, let's assume that they didn't have an opportunity to raise this issue.

[00:23:12] Speaker 01:
So the time that they raised it was after the district court's

[00:23:17] Speaker 01:
finding saying you can go back to the beginning.

[00:23:21] Speaker 01:
And they say, wait a minute, what about 6D?

[00:23:23] Speaker 01:
And the district court said, I don't need to hear about that from you all.

[00:23:27] Speaker 01:
So we don't have any briefing or any argument about 6D.

[00:23:31] Speaker 00:
Richard had ample opportunity, and indeed the obligation, to produce information to show what the course of dealing was between the parties.

[00:23:42] Speaker 00:
And they submitted those affidavits not just

[00:23:45] Speaker 00:
They cite those affidavits not just in support of their 6D argument.

[00:23:48] Speaker 00:
They cite those affidavits in support of their argument that the course of dealing supports Bridger's interpretation of adjoining lands.

[00:23:55] Speaker 00:
And we asked Bridger for information to support, if there's any documents in the records to support their course of dealing arguments, that's at app 794 is our specific discovery request.

[00:24:08] Speaker 00:
And Bridger produced nothing.

[00:24:10] Speaker 00:
I also want to just point out, Your Honor,

[00:24:12] Speaker 00:
that the Nagel affidavit, which is the centerpiece of Bridger's defense, Section 6D defense, and also the centerpiece of its course of dealing argument, he stated that during my time administering the nine-mile lease until my retirement, Bridger Cole exceeded the 45% of the production obligations.

[00:24:31] Speaker 00:
So there was no time at which the advance royalty calculation under Section 6 was triggered or was required to be computed.

[00:24:40] Speaker 00:
I therefore did not have reason to focus on the calculation of the advanced royalty under Section 6."

[00:24:46] Speaker 00:
That is Bridger's undisputed testimony.

[00:24:48] Speaker 04:
So Bridger's statement... Let me ask you a question about what your client got from Bridger or your client's predecessor.

[00:24:56] Speaker 04:
Did they receive a statement

[00:24:59] Speaker 04:
showing how much was mined off of the nine-mile lease.

[00:25:06] Speaker 00:
We have no idea, Your Honor, because we requested that information in discovery, and Bridger never produced anything.

[00:25:11] Speaker 04:
But in your own documents, you don't have that?

[00:25:14] Speaker 00:
No, Your Honor, not to my knowledge.

[00:25:16] Speaker 00:
If I may, I'd just like to, before my time runs out, I would like to, if I may, and if Judge Moritz has no further questions about the Section 60 argument,

[00:25:27] Speaker 00:
Briefly go back to the other issue in the case, which is adjoining lands.

[00:25:31] Speaker 00:
And Judge Person.

[00:25:32] Speaker 03:
Before you move off 60, I'm sorry to impede your argument.

[00:25:37] Speaker 03:
But if Wildcat received a regular royalty payment, and there was no advanced royalty provided, it seems to me that

[00:25:52] Speaker 03:
presumes that Bridger had done an underlying analysis of the coal mined outside the lease and made a determination that the 45% threshold was not met.

[00:26:05] Speaker 03:
So doesn't the regular royalty implicitly decide that there was no excess mining on those lands?

[00:26:16] Speaker 03:
And couldn't Wildcat have objected to that determination?

[00:26:22] Speaker 03:
as a part of its due diligence in receiving a payment say, well, maybe we need to confirm the accuracy of Bridger's calculation on offsite mining.

[00:26:34] Speaker 03:
Wouldn't that be part of your 6D obligation here?

[00:26:38] Speaker 00:
So first of all, just in turning to the actual facts of what happened here, Wildcat did object to the non-payment of advanced royalties in 2021.

[00:26:49] Speaker 00:
I take it what your honor is asking is,

[00:26:51] Speaker 00:
Can't we infer from the fact that Anadarko supposedly never protested to the non-payment of advance royalties, that it must have gone and looked at the figures and concluded that they were correct?

[00:27:04] Speaker 03:
Or it chose not to.

[00:27:05] Speaker 00:
And chose not to?

[00:27:08] Speaker 00:
Your Honor, we asked for information to support this in discovering we received nothing.

[00:27:12] Speaker 00:
All we received was this after-the-fact affidavit from Harry Nagel, who didn't even come on the scene until the year 2000.

[00:27:21] Speaker 03:
Well, does that matter if there's a 36 month statute of limitations?

[00:27:26] Speaker 03:
Regardless of who did what, but if Wildcat had an obligation to challenge the accounting and never did so within the 36 months, doesn't 6D then control?

[00:27:41] Speaker 00:
No, Your Honor.

[00:27:41] Speaker 00:
And I think, again, it's the plain language that has to govern here.

[00:27:46] Speaker 00:
And the language of 6D, just as the language of the adjoining lands provision,

[00:27:51] Speaker 00:
in our view, is crystal clear.

[00:27:53] Speaker 00:
It's only triggered by an actual royalty payment and a statement or accounting provided in support thereof.

[00:28:02] Speaker 00:
And because it's undisputed that the only royalty payments that Bridger ever made to Wildcat's predecessor were production royalty payments, the only statements or accountings required in support thereof were statements or accountings as to the actual production on Rock Springs lands.

[00:28:21] Speaker 00:
Anna Darko may, for all we know, have just taken Bridger's word for the fact that it didn't violate the 45% threshold.

[00:28:30] Speaker 00:
We don't know what actually went on between the parties because there's no record on this point.

[00:28:35] Speaker 04:
Well, if they did, after three years, it's too late.

[00:28:40] Speaker 04:
They have to live with it because the 45% threshold is relevant to the royalty calculation.

[00:28:50] Speaker 00:
Yes, Your Honor, but the operative term word there in your question was if.

[00:28:53] Speaker 00:
And if Bridger wanted to advance this argument and had an obligation to support it with actual evidence in the record, which it did not.

[00:29:01] Speaker 01:
So is your argument basically that either of these parties, regardless of 60 and what it says, they can either one challenge ad infinitum.

[00:29:12] Speaker 01:
30 years from now, they can challenge the 20

[00:29:18] Speaker 01:
whatever, 2015 or whatever they want, if they didn't object to it back then.

[00:29:24] Speaker 01:
The 36 months' meeting was, and 30, 50, 75 years from now, they could say, hey, you know, that wasn't the correct calculation of adjoining lands back 50 years ago.

[00:29:37] Speaker 01:
I'm going to go ahead and challenge that now.

[00:29:39] Speaker 01:
Is that your position?

[00:29:40] Speaker 01:
Because it seems to be.

[00:29:41] Speaker 01:
No, Your Honor, I think- The 36 months seems meaningless here.

[00:29:44] Speaker 00:
I think that, no, Your Honor, I could see that that seems a bridge too far.

[00:29:50] Speaker 00:
But in this case, what we have is a unique circumstance where the court- Where would you draw the line?

[00:29:54] Speaker 00:
Where we have a district court.

[00:29:55] Speaker 00:
I would say that because the district court here ruled, and it's a ruling we didn't challenge, but it was the district court agreed with Bridger

[00:30:05] Speaker 00:
that it was entitled to go back to the beginning of the lease.

[00:30:09] Speaker 00:
And that opens the door for the purposes of adjudicating the proper amount of damages due for the period from 1986 to the present.

[00:30:20] Speaker 00:
That opens up

[00:30:22] Speaker 00:
that every five-year period for just a recalculation of adjoining lands.

[00:30:26] Speaker 01:
That is a totally different issue than whether you can go back to the beginning of the lease to recalculate royalties that you now say should have been paid 30 years ago.

[00:30:38] Speaker 01:
That's a totally different issue than what the district court ruled in Bridger's favor on.

[00:30:46] Speaker 00:
I apologize, Your Honor, if I'm not understanding your question.

[00:30:48] Speaker 00:
I think our position here is that

[00:30:51] Speaker 00:
In light of the district court's ruling, it was entirely proper, notwithstanding Section 6D, for the court to order Bridger to recalculate its compliance with the 45% production threshold based on the proper definition of adjoining lands.

[00:31:06] Speaker 00:
We are not arguing that we're entitled to go back and nitpick over everything that Bridger ever said about its volumes of production

[00:31:16] Speaker 00:
back towards the beginning of time.

[00:31:18] Speaker 00:
But this case does present a unique circumstance.

[00:31:20] Speaker 00:
If I may just very briefly, before I run out of time, say a word about.

[00:31:24] Speaker 04:
Let me ask you a question about the underground coal.

[00:31:28] Speaker 04:
Sure.

[00:31:28] Speaker 04:
And I'm going to probably get the precise language used wrong.

[00:31:32] Speaker 04:
But something in the 10-mile lease says that the 10-mile lease is going to govern underground mining, and the 9-mile lease is going to govern surface mining, for lack of a better term.

[00:31:44] Speaker 00:
Yes, Your Honor.

[00:31:44] Speaker 04:
That's section 26.

[00:31:47] Speaker 04:
How do we deal with that?

[00:31:48] Speaker 04:
Because it seems like that suggests that the underground mining is not governed by the nine-mile lease, especially when you consider there's overlap between the lands in the nine-mile and the 10-mile lease.

[00:32:06] Speaker 00:
Your Honor, our position is that Section 26 merely clarifies that the terms of the nine-mile lease will govern surface mining in the area above the 10-mile lease premises.

[00:32:17] Speaker 00:
In other words, the royalty provisions and so forth and the adjoining land provision in the nine-mile lease were governed in the surface area.

[00:32:25] Speaker 00:
And then the 10-mile lease will govern underground mining on the premises beneath.

[00:32:30] Speaker 00:
So the 10-mile lease had different royalty provisions, all kinds of different provisions.

[00:32:33] Speaker 00:
It even had a different adjoining land provision.

[00:32:36] Speaker 00:
But there's nothing in Section 26 that indicates that by virtue of the fact that there's a new lease for the 10-mile rim,

[00:32:47] Speaker 00:
that somehow that wipes out the adjoining lands provision in the nine-mile lease or somehow inserts an exception that's not supported by the plain language of the lease?

[00:32:56] Speaker 04:
I mean, the language you just read to me suggests the opposite.

[00:33:02] Speaker 04:
I think that the 10-mile lease, if it's happening underground, it's going to be controlled by the 10-mile lease.

[00:33:10] Speaker 04:
And like you said, it has a different adjoining lands position or definition and everything else.

[00:33:17] Speaker 04:
If it gelled with the 9-mile lease's adjoining lands provision, why would they have even needed an adjoining lands provision in the 10-mile lease?

[00:33:26] Speaker 00:
Well, the adjoining lands provision in the adjoint in the 10-mile lease serves a very different purpose.

[00:33:31] Speaker 00:
Basically, it doesn't have anything to do with what's contiguous or not contiguous to Rock Springs lands.

[00:33:37] Speaker 00:
What it does is it has to do with a promise that the lessee made makes to the lessor, that it will indemnify the lessor for any damage to

[00:33:46] Speaker 00:
the lands that the lessor is mining and any adjoining properties.

[00:33:50] Speaker 00:
So it does have its own adjoining lands provision, but it's a very different kind of adjoining lands provision.

[00:33:56] Speaker 00:
I think maybe another way to answer your own question.

[00:33:59] Speaker 04:
Let me ask you another question.

[00:34:00] Speaker 04:
So you say it has a different royalty?

[00:34:03] Speaker 00:
My understanding is that's correct.

[00:34:06] Speaker 00:
Or it may be that at the time it was written, it was different, and then it became the same.

[00:34:11] Speaker 00:
I apologize.

[00:34:12] Speaker 04:
OK, well, the record will show this.

[00:34:14] Speaker 04:
But I assume that it does.

[00:34:16] Speaker 04:
I mean, if it has a different royalty provision, I mean, doesn't that suggest that it was intended to supplant the royalty provision from the nine mile lease?

[00:34:24] Speaker 00:
No, Your Honor.

[00:34:25] Speaker 00:
So this brings me back.

[00:34:27] Speaker 04:
I mean, they could arguably be paying a double royalty to the same people.

[00:34:31] Speaker 00:
So the double royalty argument, Your Honor,

[00:34:33] Speaker 00:
is a red herring, because it's not a double royalty.

[00:34:40] Speaker 00:
An advance royalty is a payment that can be recouped by Bridger, first of all.

[00:34:44] Speaker 00:
And Bridger is the master of its own destiny.

[00:34:46] Speaker 00:
Bridger fails to mine at least 45%.

[00:34:49] Speaker 00:
It has to pay

[00:34:51] Speaker 00:
an advance royalty, it can recoup that later in the lease.

[00:34:54] Speaker 04:
What if the nine-mile lease is out of coal?

[00:34:56] Speaker 04:
I mean, I think your opposing counsel would say, listen, this nine-mile lease is old.

[00:35:01] Speaker 04:
It's playing out.

[00:35:03] Speaker 04:
That's why we're moving away from it.

[00:35:06] Speaker 04:
I heard that that's what... I mean, presumably that might never be recovered.

[00:35:10] Speaker 00:
I heard my predecessor say that there's absolutely nothing in the record to support his contention that the nine-mile lease is running out of coal.

[00:35:17] Speaker 00:
It isn't.

[00:35:18] Speaker 00:
But the other answer to Your Honor's question, and this brings me back to the point I kept trying to make and I'm hoping I can make before I sit down, which is that the plain language of the adjoining lands provision governs here with regard to both the 10-mile lease and the Section 11 lease and the Section 25-mile lease.

[00:35:36] Speaker 00:
And the plain language says that adjoining lands include any adjoining lands that are contiguous to rock springs that are acquired by the Lessee after 1986.

[00:35:48] Speaker 00:
And there's nothing in any of these subsequent leases that purports to override that.

[00:35:53] Speaker 00:
And I would just say, and this is the point I've been trying to make, and I hope to get it out even though I'm out of my time.

[00:35:58] Speaker 03:
You can make the point because we took your time.

[00:36:01] Speaker 00:
Judge Carson, I think you asked exactly the right question when you said to get to the context, to consider all of Bridger's so-called evidence about course of dealing.

[00:36:13] Speaker 00:
Do we need to have some kind of ambiguity?

[00:36:15] Speaker 00:
The answer is unquestionably yes.

[00:36:18] Speaker 00:
And that is all you need to look no further than Bridger's own cited cases, M&M Auto, the Hickman case.

[00:36:26] Speaker 00:
I would urge the court to take a look at Hickman versus Taylor.

[00:36:29] Speaker 00:
Hickman makes clear that where a lease is unambiguous, as this one is, the only thing a court can consider is surrounding circumstances, which involves the setting at the time the lease was negotiated and certain

[00:36:41] Speaker 00:
narrow things about the parties, their relationship, their relative sophistication, and whether they were actually supported by counsel.

[00:36:48] Speaker 00:
There is not a single case cited by Bridger or anywhere in the law books that I can find that supports the proposition that you can consider course of dealing evidence to somehow override or construe the otherwise unambiguous provisions of a lease.

[00:37:04] Speaker 00:
And with that, I thank the court for your indulgence.

[00:37:09] Speaker 03:
You're welcome.

[00:37:09] Speaker 03:
and we'll give a minute to Mr. Yand.

[00:37:14] Speaker 02:
Thank you, Your Honor.

[00:37:15] Speaker 02:
I'd like to speak very quickly to the record regarding what was given to Anadarko RSRC.

[00:37:23] Speaker 02:
If you look at paragraph 10 of Harry Nagel's affidavit,

[00:37:27] Speaker 02:
You'll see that it says, in my capacity as manager of minerals for Anadarko, I was personally involved in the periodic audits of the coal production and royalty calculation data provided by Bridger to Anadarko.

[00:37:38] Speaker 02:
Anadarko carefully audited production and royalty information provided by Bridger Coal.

[00:37:42] Speaker 02:
During those audits, Anadarko treated the adjoining lands as state and federal coal leases within the nine mile lease surface operation land.

[00:37:49] Speaker 02:
I think that is all the evidence that's necessary to conclude that the protest period was triggered.

[00:37:57] Speaker 04:
So that could be true.

[00:37:59] Speaker 04:
Okay, a little different point talking about the protest period.

[00:38:05] Speaker 04:
Do you stand on that affidavit for us to determine what the meaning of adjoining lands is?

[00:38:12] Speaker 02:
I think it is part of the mosaic of evidence, but I would certainly start with the text as we're required to do.

[00:38:17] Speaker 02:
If you look at recital three, the language that precedes the any contiguous leases all refers to state and federal lands.

[00:38:24] Speaker 02:
And under ordinary principle of contract interpretation, it should limit that leader catch-all.

[00:38:30] Speaker 02:
And then you have section 15, which refers to

[00:38:33] Speaker 02:
surrendering all leases on the adjoining lands to the government.

[00:38:40] Speaker 02:
But there were no private adjoining lands at that time.

[00:38:46] Speaker 02:
It says that all leases on adjoining lands can be surrendered to the government.

[00:38:54] Speaker 02:
And so there's no exception for the later possibility that there would be.

[00:38:59] Speaker 04:
It specifically contemplates further acquisitions of federal, state, and private lands, doesn't it?

[00:39:10] Speaker 02:
No, it does not specifically contemplate that, Your Honor.

[00:39:13] Speaker 02:
There's no reference to purchases or later acquired private leases being part of adjoining lands.

[00:39:22] Speaker 02:
There's no express reference to that.

[00:39:28] Speaker 02:
Let me conclude with two other points.

[00:39:33] Speaker 02:
One is in section six, there is an audit right.

[00:39:39] Speaker 02:
that precedes the protest period provision.

[00:39:45] Speaker 02:
That's what makes the three-year look-back period operative, is the fact that Anadarko and RSRC

[00:39:54] Speaker 02:
could and did come in and audit these figures.

[00:39:57] Speaker 02:
And that was their opportunity to look.

[00:39:59] Speaker 02:
They can't now re-audit them 20 plus years later.

[00:40:03] Speaker 02:
And finally, Your Honors, I would just say on the ambiguity point, the M&M Auto case absolutely looked to extrinsic evidence, of course, of performance in determining the plain meaning of the contract at issue in that case.

[00:40:19] Speaker 02:
And finally, if the court is of the view that the contract does not unambiguously support our reading of the adjoining lands provision, we would submit that it certainly does not unambiguously support Wildcat's reading.

[00:40:38] Speaker 02:
And therefore, we're in the world of ambiguity.

[00:40:40] Speaker 02:
It's appropriate to look to all the extrinsic evidence, which all points towards our reading.

[00:40:46] Speaker 02:
and warrants judgment in favor of Bridger.

[00:40:50] Speaker 02:
Thank you, Your Honors.

[00:40:51] Speaker 03:
All right.

[00:40:51] Speaker 03:
Thank you, Counsel.

[00:40:52] Speaker 03:
We appreciate the arguments.

[00:40:55] Speaker 03:
The case is submitted, and Counselor excused.