In this case a number of matters come up for consideration, including an understanding of the qualitative standards of production of a well in a field of other wells, including insofar as certain wells are “updip” versus “downdip.” The watering out concerns become more piqued if one has to make determinations about different qualitative productions while also evaluating the total capacity of the field. As determined in this case, each well owner and the company of concern negotiate on a one-to-one basis. The company cannot equivocate between the individual well-owner’s needs and the needs of the other well owners in regard to the individual well owner’s complaint. Additionally, the matter concerning the application for license and the fulfillment of terms associated are explicitly considered by the judge in regards to intent to negotiate in good faith or fulfill the contract terms in good faith. 

 

It is not merely the effort, however, to apply for the license BUT the justifications the company has to provide to qualify the license per specific exceptions per terms of the Railroad Commission policy Rule 37. An intentional manipulation of timelines by the company are to be considered in determining whether or not the company fulfilled its obligations under the terms of its contract it offered. As the judge said in this case, it was the company’s responsibility to attend to the watering out issue by applying for the permit and determining for presentation as part of the license application the justification for having such a license granted.

 

Amoco Production Company v. Alexander 622 S.W.2d 866 1981

 

Before 3:40 pm CST on March 15, 2022

 

Composed in electronic format at 5:45 pm CST

March 15, 2022