The Seventh District Court of Appeals recently affirmed summary judgment against two lessors asserting claims of bad faith pooling and subsurface mineral trespass. In Ischy v. Northwood Energy Corp., lessors claimed, in part, that the lessee’s inclusion of .19 acres of the 297-acre lease in a pooled unit breached the lessee’s covenant of good faith and fair dealing, as the lessee allegedly did so only to hold the remainder of the leased premises knowing that the planned wellbore would not drain the lessors’ property. The court rejected that claim, observing that the lease’s pooling provision expressly allowed the lessee to pool all or any part of the leased premises, and that a party does not breach the implied covenant of good faith and fair dealing when it simply exercises its contractual rights. The court further found that even if the lease had not been held by those unit operations, it was maintained into the secondary term by certain incidental off-lease operations and the lease’s broad definition of operations (which included all work preparatory, incident or related to the actual drilling, testing, or completing of a well).
For more, see the case here.
[For purposes of full disclosure, note that the Vorys firm represented the lessee in this matter.]