Potential Oil and Gas Lessees Should Look Closely for "Implied Requirement" in Leases

By -
From Gas & Oil:
Under Ohio law, oil and gas leases constitute contracts. As a general matter, the rights and remedies of the parties entering into a contract must be determined by the terms of the written agreement. Over the years, however, Ohio courts have determined that oil and gas leases should include a number of “implied covenants”—provisions which the courts will assume the parties meant to include, even if the contract does not specifically address the issue. These implied covenants include a producer’s obligation: (1) to drill an initial exploratory well; (2) to protect the lease from drainage from wells on neighboring properties; (3) to reasonably develop the land; (4) to explore further after an initial well is drilled on a large tract of land; (5) to market the oil and gas produced; and (6) to conduct all operations that affect the mineral owner’s royalty interest with reasonable care and due diligence. Of these implied covenants, the covenant to reasonably develop the land covered by the lease is one of the most important.

The implied covenant of reasonable development originates from the goal of an oil and gas lease. Namely, the courts have long recognized that a mineral owner’s goal in leasing acreage is to collect royalties on oil and gas produced after wells are drilled. Further, Ohio public policy supports the development of the state’s natural resources. Thus, the implied covenant of reasonable development requires producers to use reasonable diligence to develop the leased acreage. Where a lease covers a significant block of acreage, a producer must often drill multiple wells on the acreage included in the lease. When additional oil and gas development takes place in an area, the implied covenant of reasonable development may also require a producer to further develop the leased property based upon changing circumstances. If a court decides that a producer has violated the implied covenant of reasonable development, the court may award money damages or may order the release of undeveloped acreage, thereby allowing the mineral owner to seek out a producer who will fully develop the acreage.
You can read more about this by clicking here.

Connect with us on Facebook and Twitter!

Popular posts from this blog

Fracktivist in Dimock Releases Carefully Edited Video, Refuses to Release the Rest

By -
Image
From Energy in Depth: There is something very strange going on along Carter Road, in Dimock, Pennsylvania, and I’m not speaking of natural gas, methane migration, contamination, litigation or even the extensive water testing there by the EPA and others.  No, I’m talking about a new “Watergate” conspiracy, complete with 18 minutes of missing tape (well, video, actually). It seems the ever-present Green Party member and  naturist   Vera Scroggins  (a/k/a  Vera Duerga ) has posted a video of Craig Sautner meeting with the EPA.  Mysteriously, the video is but 14 seconds in length, cutting off conversation in what is obviously mid-stream.  It raises a question Craig Sautner, like  Ronald Reagan in Kings Row , might have asked, “Where’s the rest of me?’  Carter Road, isn’t Kings Row, of course, (at least not until you arrive at  the mansion Scott Ely, one of the Dimock litigants, is building with his royalty money ), but there appears to be...
Read more

The Second Largest Oil and Gas Merger - Cabot and Cimarex

By -
Image
       Due to investor pressure, the U.S shale drillers are being pushed to improve financial and operational performance after a few years of poor returns. Even though the industry has improved its numbers, when compared to last year, investors still want more to be done for them to earn more money.      That's why two mid-tier shale drillers, Cabot and Climarex, have decided to merge in order to eliminate $100 million in annual costs, which means more money for the investors. This all-stock transaction is valued at about $7.4 billion, which is relatively high for the oil and gas sector.      The new entity will be renamed and the headquarters located in Houston, Texas. Cabot shareholders will own 49.5 percent of the new entity, and Climarex the rest.       The Cimarex-Cabot merger will address the investor's demand for a higher amount of returning cash. The initial plan is to pay a 50-cent-per-share special dividen...
Read more

Do You Know The History of Fracking?

By -
Image
  In 2018, 59% of total oil production in the U.S came from hydraulic fracking, which means it accounted for more than two-thirds of domestically manufactured gas. By 2024, fracking will reach an astounding $68 billion market value! Of course, fracking is not a new drilling method as you can trace it back hundreds of years. That's why we want to consider the history of hydraulic fracturing (fracking). We will be stating historical facts about it and focusing on the major historical occurrences that have influenced modern-day fracking. Pre-Fracking Days The idea of fracking started back in 1862 when Edward A.L. Roberts (Civil War veteran) witnessed Confederate soldiers exploding artillery rounds into a canal that obstructed a battlefield. At the time, Edward A.L. Roberts called it superincumbent fluid tamping. On April 26th, 1865, Edward A.L. Roberts began experimenting with exploding torpedoes, which consisted of lowering a torpedo containing an amount of powder from fifteen to tw...
Read more