Opinion ID: 1230173
Heading Depth: 1
Heading Rank: 5

Heading: The Implied Covenant to Market (Doctrine of Temporary Cessation)

Text: To this point we have held that the express provisions of the subject oil and gas leases do not require the lessees to remove and market oil or gas from the leases in order to keep the lease from terminating. However, our inquiry does not stop there for the longstanding rule is that typical oil and gas leases contain an implied covenant to market oil and gas from the subject wells. In State ex rel. Commissioners of the Land Office v. Carter Oil Co. of West Virginia, supra , we affirmed the rule of law set down in Cotner v. Warren, 330 P.2d 217 (Okla. 1958) and stated: In other words in the absence of a specific clause requiring marketing within the primary term fixed in the lease, the completion of a well, as provided therein, capable of producing oil or gas in paying quantities will extend such term, provided that within a reasonable time the actual length of which must of necessity depend upon the facts and circumstances of each case, a market is obtained and oil or gas is produced and sold from such well. In such event if the producing and marketing thereof in such quantities from the well so completed is continued, the lease will extend until the economic exhaustion of the product. 336 P.2d at 1095. In State v. Carter Oil, the evidence showed that due diligence was exercised in the seeking and obtaining of a market and, under the circumstances, such market was found within a reasonable time. Consequently, the lease was not terminated where the lessees completed the well which was capable of producing in paying quantities but were unable for over one year past the expiration date of the primary term to market the product due to not having a pipeline in the area in which to transport the product. In Cotner, we adopted the rule concerning the implied covenant to market holding that the controlling factual finding is whether or not the temporary cessation of marketing was for an unreasonable length of time. 330 P.2d at 219. [7] We concluded that five to six months of voluntary cessation of marketing was not unreasonable under the circumstances because the operator was attempting to work out a problem with the lessees. The facts indicated that the problem was resolved when Warren bought out the rest of the partners becoming the sole lessee and immediately attempted to enter the premises to resume operations and drill another well. The lease had not expired under the facts and circumstances presented. Compare Hunter v. Clarkson, 428 P.2d 210 (Okla. 1967) in which this Court affirmed the trial court's cancellation of an oil and gas lease where production and marketing from the well had been voluntarily ceased by the lessee for a period of five months without any circumstances to justify the cessation. It, therefore, follows that the lessees in the cases at bar may voluntarily cease removal and marketing of gas from the subject wells for a reasonable time where there are equitable considerations which justify a temporary cessation. Townsend v. Creekmore-Rooney Co., 332 P.2d 35, 37 (Okla. 1958). If the temporary cessation is reasonable, the lease will continue, and the burden of proving that the lessees failed to use reasonable diligence in the operation of the well squarely rests with the lessors. Durkee v. Hazan, 452 P.2d 803, 814 (Okla. 1968); State ex rel. Comm'rs of the Land Office v. Amoco Production Co., 645 P.2d 468, 470 (Okla. 1982). The lessors have failed to meet that burden. We find that under the facts and circumstances of the case at bar the lessees' temporary cessation was for a reasonable time and justified by equitable considerations.