Gulf Production Co. v. Kishi
Commission of Appeals of Texas
103 S.W.2d 965 (Tex. Comm'n App. 1937)
Kishi and other landowners (plaintiffs) leased oil and gas rights to Gulf Production (defendant), with the leases expressly requiring wells to be drilled every 60 or 90 days (depending on the tract) after discovery until 12 wells (first tract) or four wells (second tract) were drilled; Gulf drilled 15 wells on the first tract and five on the second, exceeding the express requirements, but the plaintiffs sued claiming reasonable diligence would have required many more new wells annually under an implied further-development covenant. The trial court awarded damages for the plaintiffs, the court of civil appeals reversed, and the certified question of the implied covenant's applicability reached the Commission of Appeals.
Whether an oil and gas lease is subject to the implied covenant of reasonable further development if the lease expressly provides for development of the leasehold by stipulating the number of wells to be drilled after discovery.