pjc-oil-and-gas-2022-lib

L ESSOR -L ESSEE I SSUES

PJC 303.20

QUESTION ______ Do you find that, under all the relevant circumstances, a reasonably prudent operator would not continue, for the purpose of making a profit and not merely for speculation, to operate the lease in the manner in which it was operated? In deciding whether a reasonably prudent operator would not continue, for profit and not merely for speculation, to operate the lease in the manner in which it was operated, you must take into consideration all factors that would influence a reasonably prudent operator. Some of the factors include— 1. the depletion of the reservoir and the price for which the lessee is able to sell his produce; 2. the relative profitableness of other wells in the area; 3. the operating and marketing costs of the lease; 4. the lessee’s net profit; 5. the lease provisions; 6. a reasonable period of time under the circumstances; and 7. whether or not the lessee is holding the lease merely for speculative purposes. Answer “Yes” or “No.” Answer: _______________ COMMENT When to use. PJC 303.20 should be used when the issue is whether a lease has terminated for failure to produce in paying quantities. Source of question and instruction. PJC 303.20 is derived from BP America Production Co. v. Laddex, Ltd. , 513 S.W.3d 476 (Tex. 2017); Skelly Oil Co. v. Archer , 356 S.W.2d 774, 780–82 (Tex. 1961); Clifton v. Koontz , 325 S.W.2d 684, 691 (Tex. 1959); Evans v. Gulf Oil Corp. , 840 S.W.2d 500, 503 (Tex. App.—Corpus Christi– Edinburg 1992, writ denied); and Pshigoda v. Texaco, Inc. , 703 S.W.2d 416, 418 (Tex. App.—Amarillo 1986, writ ref'd n.r.e.). Burden of proof in paying quantities case. Note that the burden of proof in a paying quantities case is on the lessor who alleges a failure to produce in paying quan tities. See Bargsley v. Pryor Petroleum Corp. , 196 S.W.3d 823, 829 (Tex. App.—East land 2006, no writ).

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