Law Commons^™

Implied Covenant Of Development And Further Exploration - Dilemma Or Solution., James Irwin Calk

St. Mary's Law Journal

The typical oil and gas lease does not specifically enumerate the lessee’s obligations regarding development and further exploratory activity after initial production has been achieved on the lease. However, several jurisdictions, including Texas, have found these obligations as implied under a general covenant of development. The majority standard in determining a breach of this covenant is the reasonable prudent operator rule. Most importantly, can the operator reasonably expect profits from further exploration. In Texas, the burden of proving an expectation of profits falls on the lessor. However, as the Texas Supreme Court has not fully addressed the issue, there may …