Amoco Production Co. v. First Baptist Church of Pyote
In Amoco Production Co. v. First Baptist Church of Pyote, 611 S.W.2d 610 (Tex. 1980), the owners of a proceeds royalty claimed that the producer had acted in bad faith in selling the gas at a rate substantially below market value. 611 S.W.2d at 610.
Under these circumstances, we agreed that the lessee could be liable for breaching the implied covenant to market the lessors' gas. Id.
The Court cautioned, however, that this holding did not create "an absolute duty to sell gas at market value under a 'proceeds' royalty clause." Id.
The Court concluded that while "failure to sell at market value may be relevant evidence of a breach of the covenant to market in good faith," such failure "is merely probative and is not conclusive." Id.