There are 6 commonly recognized "implied covenenants" in an oil and gas lease. Recognized by States like Texas, Lousiaina, Oklahoma, etx.... Does the State of North Dakota recognize these implied conenenants and have they ever been tested in the North Dakota Judicial System - Particularly the covenenant to "Reasonably develop the leased Premises" ?
Six of the most commonly recognized implied duties are the implied
covenants to:
(1) drill an initial test well;
(2) reasonably develop the leased premises;
(3) conduct further exploration of the leased premises;
(4) protect the leased premises against drainage;
(5) diligently market any oil or gas that is discovered in paying quantities;
(6) reasonably restore the surface of the leased premises after the lease is
over
Mark, for numbers 2 through 4 I think the best that can be said is they sometimes happen. I am sure all of it has been tested in ND courts, although I wouldn't swear to it. I think the state of ND colluded with the land grab to the extent of overlarge spacings, and were the state to require the operators to honor these covenants it would have delayed the leasing drilling and holding by production of a large part of the western half of the state. I have 6 single wells each holding their own 1280 spacing, some for more than 4 years. Operators are sometimes drilling more than 1 well per pad and more than one well per spacing, but I think that is mainly because they learned it was cheaper to do two or more at once, and it has nothing to do with the covenant to reasonably devlop or to conduct further exploration. My 6 single wells are in a good area in McKenzie county, it's not like they didn't find oil there. I'm not going to hold my breath waiting for the operator to discover the covenants that might lead to a few more wells in my spacings. I think I can say I will believe in the infil wells when I see them.
You try and tell those supposed implied covenants to any operator here in Oklahoma and they will tell you your full of it, believe me I know from first hand experience. I have a well that has produced around 100 to 40 mcf per month for the past 10 years, there is no way it is producing in paying quantities. You can take it to court if one wants to. I almost never see an operator develop the area.