NGC Energy Co. v. Mono Power Co.
Interior Board of Land Appeals
114 IBLA 141 (1990)
NGC Energy Co. and Mono Power Co. each held a 25 percent interest in a federal oil and gas lease, and Mono also held an interest in an adjacent lease containing a well the Bureau of Land Management (BLM) found had drained gas from the shared federal leasehold. The BLM conceded a protective well on the drained tract would have been uneconomical, but nonetheless assessed compensatory royalties against NGC and Mono, reasoning that Mono, as a common lessee of both tracts, had an absolute duty to unitize them to prevent the drainage regardless of economics; the Colorado BLM office affirmed, and NGC and Mono appealed.
Whether a common lessee of adjacent federal oil and gas leases has an absolute duty to unitize the tracts to prevent drainage, even when a prudent operator would not find it economically justified to drill a protective well.