Covenants IMplied in Oil and Gas Leases

Question 1

Three Implied Covenants- Texas

Answer 1

1. To protect from drainage
2. Reasonable development and further exploration
3. To Market

Question 2

Four Implied Covenants- Colorado

Answer 2

1. To conduct exploratory drilling
2. To develop after discovering resources that can be profitably developed
3. To operate diligently and prudently
4. To protect the leasehold against drainage

Question 3

Reasonable Prudent Operator Standard

Answer 3

Requires a lessee to conduct itself under all circumstances as a reasonable prudent operator would. This is not a seperate cause of action, rather it is applied to define the other implied covenants. The lessee has an obligation to act in good faith and fair dealing but owes no fiduciary duty

Question 4

Three Types of Implied Covenants

Answer 4

Implied: Exists in every lease
Implied in fact: Derived from the written agreement and circumstances surrounding its execution
Implied in law: Added to the contract by a court to promote fairness, justice and equity

Question 5

When do implied covenants arise?

Answer 5

When there is no express provision in the lease regarding the duties in the implied covenants