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Covenants to Protect Against Drainage

The Texas Supreme Court recently decided a case involving a covenant to protect against drainage. In Rosetta Resources Operating, LP v. Martin, the Court considered several issues, one of which was whether the covenant had been triggered by language in the addendum to the oil and gas lease.

Rosetta and two other companies drilled a well on property that was near but not adjacent to the pooled unit that contained a portion of the Martin’s property. The Martins sued, based on language in the addendum, claiming Rosetta and another oil company failed to protect them from drainage by the nearby well. The Court held that the covenant in the addendum was subject to competing reasonable interpretations as to when the covenant was triggered and reinstated the trial court’s ruling denying relief to the Martins for violation of the covenant.

All of this underscores how important clear and unequivocal language in the oil and gas lease is.

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