Whitham Farms, LLC v. City of Longmont

Whitham Farms and the City of Longmont (plaintiffs) held surface and mineral rights on land subject to an oil and gas lease held by NARCO (defendant), which had drilled only one well on the tract; when Whitham demanded release of the unused portions, NARCO refused, and Whitham sued for a declaration that NARCO breached the implied covenant to further develop, which would terminate the lease. All parties agreed additional wells on the tract would not be economically viable at the time of trial, but disputed whether that fact meant NARCO had nonetheless breached the covenant; the trial court ruled for NARCO, and Whitham and Longmont appealed.

Whether, in a proven oil or gas field, a lessee is required to develop the lease further when there is a reasonable expectation that additional wells would generate enough revenue to cover development costs and return a reasonable profit.