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Common Law Origins of the Duty to Protect against Drainage

Bruce M. Kramer, Federal Drainage Protection & Compensatory Royalties (1994)

The development of implied covenant jurisprudence and the development of oil and gas jurisprudence has gone hand in hand. Oil and gas production has been occurring in the United States since the 1850's. Major developments in oil and gas law developed some 30-40 years later and were reasonably mature by the mid-1920's. Implied covenant law followed that same chronological pattern. The earliest cases arose in the 1890's but after the landmark decision in Brewster v. Lanyon Zinc Co.,1 the basic parameters of implied covenant jurisprudence were laid out. This was especially true of the implied covenant to protect against drainage.2 The law relating to the implied marketing covenant is not as well developed, but generally follows the basic principles of implied covenant law.

Because the federal government, for itself as well as for Indian tribes, has adopted the basic “private” or “fee” lease form, the implied covenant doctrines would be just as applicable to the federal or Indian leases as to “fee” leases. The jurisprudence of implied covenants, however, has largely developed in the private sector and not with federal oil and gas leases. This paper will review the relevant statutes, regulations, administrative decisions and judicial opinions that relate to the application of implied covenant law to federal and Indian oil and gas leases.