pjc-oil-and-gas-2022-lib

L ESSOR -L ESSEE I SSUES

PJC 303.8

PJC 303.8

Question and Instructions on Breach of Express Market Value Royalty Provision

QUESTION ______ Did Larry Lessee fail to pay Paul Payne a royalty based on the market value at the well for [ gas/other product ] produced from Paul Payne ’s lease? “Market value” is the price a willing seller not obligated to sell can obtain from a willing buyer not obligated to buy. [Include the following if comparable sales are available.] Market value at the well may be determined by comparable sales. A “compa rable sale” is one that is comparable in time, quality, quantity, and availability of marketing outlets. [Include the following if comparable sales are not available.] Market value at the well may be determined by subtracting reasonable post production costs from the market value at the point of sale. Answer “Yes” or “No.” Answer: _______________ COMMENT When to use. PJC 303.8 should be used when a party seeks royalties under an express market value royalty provision. If the dispute includes whether the gas or other product was sold on or off the leased premises, see PJC 303.6. Source of question and instructions. PJC 303.8 is derived from French v. Occi dental Permian Ltd. , 440 S.W.3d 1 (Tex. 2014) (holding royalty owners required to share in removal of carbon dioxide as part of netback calculation to determine market value); Heritage Resources, Inc. v. NationsBank , 939 S.W.2d 118, 122 (Tex. 1996); Exxon Corp. v. Middleton , 613 S.W.2d 240, 246–47 (Tex. 1981); and Texas Oil & Gas Corp. v. Hagen , 683 S.W.2d 24, 28 (Tex. App.—Texarkana 1984), dismissed as moot , 760 S.W.2d 960 (Tex. 1988). For another definition of “market value” see the current edition of State Bar of Texas, Texas Pattern Jury Charges—General Negligence, Intentional Personal Torts & Workers’ Compensation PJC 32.3. Determining market value. Comparable sales is the preferred method to use when determining market value. Heritage Resources, Inc. , 939 S.W.2d at 122. When the lease requires valuation at the well but comparable sales at the well are not readily

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