Name
Prices Go Up, Prices Go Down: The Effect of Volatile Market Conditions on a Production in “Paying Quantities” Analysis
Date & Time
Thursday, March 31, 2022, 10:40 AM - 11:40 AM
Patrick Ottinger
Description

This paper will examine the “habendum clause” of the mineral lease, specifically as it pertains to the requirement that production must be in “paying quantities.”  Particular emphasis will be on the impact of historically low commodity prices on the standard for lease maintenance, as such prices have been affected by market conditions (worldwide supply and demand) and economic slowdown resulting from the Covid-19 pandemic.  The paper will examine the principal underpinning of the doctrine of production in “paying quantities,” as articulated by the Texas Supreme Court in Clifton v. Koontz, 325 S.W. 2d 684 (Tex. 1959) that “the standard by which paying quantities is determined is whether or not under all the relevant circumstances a reasonably prudent operator would, for the purpose of making a profit and not merely for speculation, continue to operate a well in the manner in which the well in question was operated.”  

Session Type
Symposium