Opinion ID: 2448635
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Heading: Market Value at the Well

Text: Market value at the well has a commonly accepted meaning in the oil and gas industry. See generally Wakefield, Annotation, Meaning of, and Proper Method for Determining, Market Value or Market Price in Oil and Gas Lease Requiring Royalty to be Paid on Standard Measured by Such Terms, 10 ALR 4TH 732 (1981). Market value is the price a willing seller obtains from a willing buyer. See Exxon Corp. v. Middleton, 613 S.W.2d 240, 246 (Tex.1981). There are two methods to determine market value at the well. The most desirable method is to use comparable sales. Middleton, 613 S.W.2d at 246; Texas Oil & Gas Corp. v. Vela, 429 S.W.2d 866, 872 (Tex.1968). A comparable sale is one that is comparable in time, quality, quantity, and availability of marketing outlets. Middleton, 613 S.W.2d at 246; Vela, 429 S.W.2d at 872. Courts use the second method when information about comparable sales is not readily available. See, e.g., Le Cuno Oil Co. v. Smith, 306 S.W.2d 190, 193 (Tex.Civ. App.-Texarkana 1957, writ ref'd n.r.e.), cert. denied, 356 U.S. 974, 78 S.Ct. 1137, 2 L.Ed.2d 1147 (1958); Clear Creek Oil & Gas Co. v. Bushmiaer, 165 Ark. 303, 264 S.W. 830, 832 (1924); see also Pierce, Royalty Valuation Principles in a Changing Gas Market, in STATE BAR OF TEXAS PROF. DEV. PROGRAM, 11TH ANNUAL ADVANCED OIL, GAS AND MINERAL LAW COURSE E, E-9 (1993). This method involves subtracting reasonable post-production marketing costs from the market value at the point of sale. Texas Oil & Gas Corp. v. Hagen, 683 S.W.2d 24, 28 (Tex.App.-Texarkana 1984), dism'd as moot, 760 S.W.2d 960 (Tex.1988). Post-production marketing costs include transporting the gas to the market and processing the gas to make it marketable. Hagen, 683 S.W.2d at 29. With either method, the plaintiff has the burden to prove market value at the well. Hagen, 683 S.W.2d at 29.