<p>Single-Well Profits Vs. Lease-Wide Losses: Texas’s Production in Paying Quantities Test Applies to the Entire Lease</p>

Under Texas law, a typical oil and gas lease's habendum clause requires the lessee to produce oil or gas in paying quantities to extend the lease beyond its fixed primary term. As long as there is production in paying quantities, the lease can theoretically last forever. However, in an era of prolific oil and gas production, commentators and recent Texas trial courts disagree on how to apply Texas's production in paying quantities test to an oil and gas lease with multiple wells. The disagreement centers on two schools of thought: the single-well analysis and the lease-wide analysis. The single-well analysis would require only one well on the lease to be producing in paying quantities to avoid termination. The lease-wide analysis requires the entire lease to be producing in paying quantities to avoid termination. If the single-well analysis were to become the prevailing law in Texas, lessees would be held hostage to unprofitable, marginally productive leases, contrary to Texas law and public policy, and the state's overall industry would suffer. This Article recognizes that the lease-wide analysis is the proper and longstanding application of the production-in-paying-quantities doctrine under Texas law. It asks the Texas Supreme Court to apply the lease-wide PPQ analysis explicitly and directs Texas courts to continue adhering to it by requiring multi-well leases to produce in paying quantities as a whole, not on a well-by-well basis. This Article is the first to focus exclusively on whether the lease-wide or single-well production-in-paying-quantities test is proper and to examine this issue with this level of scrutiny.