Lewis v. Enerquest Oil & Gas, LLC, 2015 U.S. App. LEXIS 11298 (8th Circuit Court of Appeals) July 1, 2015

An effort to cancel leases due to breach of the implied covenant to develop the mineral interest was denied due to the lessors not giving prior written notice to the lessees of the alleged breach with an opportunity to cure the breach.

The lessors’ leases were pooled into the Chalybeat Springs Unit in 1975. Tony Allen sent a letter to the Unit operator, PetroQuest, in 2006 stating that he wanted more drilling in the Unit. When no more drilling occurred, four of the lessors applied to the Arkansas Commission to have the Unit dissolved. A hearing was held and the application denied. This suit followed.

The court held that no notice with a reasonable chance to cure was given to the lessees as required by Arkansas law and that the letter and complaint to the Commission were not sufficient notice to the lessees of the alleged breach of the implied covenant.