Production In Paying Quantities

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Production In Paying Quantities

 

 The term “paying quantities” means “production in quantities sufficient to yield a return in excess of operating costs, even though drilling and equipment costs may never be repaid and the undertaking considered as a whole may ultimately result in a loss.” Sheffield v. Exxon Corp., 424 So.2d 1297, 1303 (Ala. 1983).  Unless a lease has a “Pugh” clause to the contrary, “production of oil, gas or minerals in paying quantities from any tract of land covered by a lease will hold the entire lease beyond the primary term by production.” Meaher v. Getty Oil Co., 450 So.2d 443, 445 (Ala. 1984).

Copyright 2011 by Edward G, Hawkins. All rights reserved.