Who has the business judgment to determine if oil or gas is being produced in "paying quantities"?

The lessee has the business judgment to determine if oil or gas is being produced in "paying quantities." In a typical oil and gas lease, the lessee, usually the operator or the company extracting the resources, is responsible for managing production operations. They assess whether the production levels justify the costs of extracting the resources. The concept of "paying quantities" refers to the amount of oil or gas being produced that is economically viable to keep extraction ongoing. If the costs of production exceed the revenue generated from selling the oil or gas, the lessee may decide to halt operations.

Landowners, government regulators, and royalty owners play important roles in the broader context of oil and gas exploration and production, but they do not have the same direct responsibility for making operational and financial decisions regarding production. The lessee has the expertise and access to the necessary information to evaluate the economic feasibility of continuing production, making them best suited for this judgment.