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NGC Energy Co. v. Mono Power Co.
Interior Board of Land Appeals
114 IBLA 141 (1990)
NGC Energy Co. (NGC) and Mono Power Co. (Mono) each owned a 25 percent interest in an oil and gas lease of a federal land. Mono also owned a portion of an adjacent lease. The Bureau of Land Management (BLM) found that a well on Mono’s adjacent leasehold had drained gas from NGC and Mono’s federally-owned leasehold. The BLM conceded based on data submitted in the proceeding that drilling an additional well on the land to protect against drainage would have been uneconomical. Nevertheless, the BLM assessed NGC and Mono compensatory royalties for breach of the implied covenant to protect against drainage. The BLM found that as a common owner, Mono had an absolute duty to unitize the tracts in order to protect against drainage. The BLM found that Mono’s failure to so unitize constituted a breach of the implied duty. The Colorado State Office of the BLM affirmed the decision. NGC and Mono appealed.
Rule of Law
Holding and Reasoning (Mullen, J.)
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