Court Opinion

ID: 9690116
Source: CourtListenerOpinion
Date Created: 2023-08-24 18:54:14.803626+00
Date Added: 2024-06-11T18:18:53.626582
License: Public Domain

MESCHKE, Justice,
concurring.
I concur in the well-reasoned opinion of Chief Justice Erickstad.
The concept of a “prudent operator,” as a standard of decision in determining a breach of an implied covenant in an oil and gas lease, may be unduly emphasized in the scant findings of the trial court, and therefore perhaps in the opinion of the Chief Justice, as well. No doubt a standard of reasonableness is appropriate, but “with due consideration being given to the interests of both the lessor and the lessee.” Olson v. Schwartz, 345 N.W.2d 33, at 38 (N.D.1984). It is not the operator’s (lessee’s) prudent interests alone at stake.
In my view, what other operators would do in like circumstances is only one of the factors involved in weighing the reasonableness of the conduct of the lessee. As long as we do not lose sight of the importance of the lessor’s prudent interests, which are certainly involved in reasonableness as well, there may be no harm done in characterizing it as a “reasonably prudent operator” standard. But, I am concerned that the label may unduly focus our attention on only one side of the scale — the lessee’s.
In this case, I do not see that it makes a difference. The trial court concluded that “[t]here has been no breach by the defendants of any implied covenant to develop, explore or protect the Johnson lease,” and there was evidence to support that view.
The trial court relied significantly on evidence of exploration activities other than drilling operations to justify the lack of development here and the opinion of the Chief Justice recognizes some merit in that. It is appropriate in this case to justify the seven months between demand for development in June, 1982 and the commencement of this action in January, 1983. But, generally exploration activity short of drilling cannot hold a lease indefinitely, only temporarily, as in this case. See 5 H. Williams and C. Meyers, Oil and Gas Law § 843.8 (1985). Thus, the concluding caution quoted by the Chief Justice is fitting:
“... [0]ur decision herein should not be interpreted as licensing the defendant to do nothing in the near future toward further development of the lease.”