the value, or market price, of the gas, or production, is clearly evident in the condition at which it is sold or marketed and therefore, the Secretary's determination may be said to have a rational basis.
Plaintiff meanwhile contends, in its supplemental brief, that no determination of the reasonable value of gas was ever made by the Secretary and no hearing was ever held. However, discussions were held between the Supervisor and the representatives of Plaintiff since 1953, and much correspondence was exchanged. The Supervisor wrote a letter to his superiors on June 19, 1957, explaining the reasons for his decision, and the Acting Director and the Secretary, in their opinions, have given reasons for their decisions. This, taken together with the billing to the plaintiff for 12 cents, is considered to be sufficient determination of value.
There is no showing of any special hardship placed on the plaintiff by reason of the basis set for the royalty computation; and indeed, if there has been, the contract (in section 2(d)(4)) provides for procedures for seeking reductions in such cases.
The Secretary here (and in The Texas Company case, supra) has chosen to interpret the term 'production' as meaning all the gas in a marketable condition after it has gone through the operational procedures of separation, compression, and dehydration, such that it meets the buyer's minimum requirements. He then assigns a value of production of 12 cents, which is the same as the contract price. The Court can find no fraud, dishonesty, arbitrariness, nor capriciousness in such a determination. It may be that it is harsh, but for such a reason the Court would not impose its judgment upon that of the Secretary.
In its final analysis, the question of the Secretary's determination of 'value of production' appears to be one of mixed law and fact. To the extent it is factual, the Court will not interfere with it.
To the extent that a question of law is involved, the Court is satisfied that the Secretary acted within his statutory and regulatory authority, and that he exercised his discretion in this matter on a rational basis, and that his determination is not in contravention of the lease.
Accordingly, the Court finds that the Secretary was within his lawful authority in collecting the royalties in the amount of 12 cents per m.c.f. in this case.
The Court denies the injunctive and other relief sought by plaintiff.
Counsel for defendant will submit findings of fact in accordance with this opinion and will submit an appropriate order.