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Another Look at the Implied Covenants

Robert L. Ver Schure, Proceedings of 26th Annual Rocky Mountain Mineral Law Institute (1980)

There are six covenants which are generally recognized as being implied between private land owners and oil and gas lessees. They are:

1.The implied covenant to protect against drainage;

2.The implied covenant of reasonable development;

3.The implied covenant of further exploration;

4.The implied covenant to market the product;

5.The implied covenant to drill an initial exploratory well; and

6.The implied covenant to use reasonable care in producing the minerals.

Volumes have been written about these covenants, and any attempt to treat them adequately in one paper would be futile. Hence, this paper will be limited to a discussion of the first three enumerated covenants and a brief discussion of a possible implied duty of an oil and gas lessee to fulfill his obligation to use reasonable care in producing minerals in compliance with administrative procedures. My purpose is to provide an overview and to discuss the possible problems and pitfalls which may be encountered by the oil and gas legal practioner.

In the first instance, the very word implied indicates that these covenants are not expressed as a set of rules to govern the relationship between lessor and lessee. The typical oil and gas lease form does not contain provisions which cover the operation of the leasehold. Under the normal lease, the lessor t