wells. Held: (1) that the lease contemplated the production of the oil underlying the plaintiff's lot by means of operations conducted on its surface; (2) that the number and location of the wells necessary to carry out the purposes of the contract was a subject belonging primarily to the lessee; (3) that in disposing of this question, the lessee was bound to take into consideration the fact that his lessor was the owner of the oil, and to arrange and conduct his efforts to bring it to the surface in such manner as should best protect the interests of both parties to the contract; (4) that he was not bound to put down more wells than were reasonably necessary to obtain the oil of his lessor, nor to put down wells that would not be able to produce oil sufficient to justify the expenditure; (5) that the fact that the oil might be obtained in time through other wells, on the lands of other owners, was not enough to excuse the lessee from his implied undertaking to operate the land for the best interests of both owner and operator.

"In such a case the court may decree on bill in equity filed that unless the defendant shall drill another well within a certain time specified his leasehold estate in said land shall be deemed to be abandoned, except as to the well actually drilled on plaintiff's land, and a certain specified space around it."

Sec. 225. A Similar Ruling where the Stipulation was Express.

The case of Bradford Oil Co. vs. Blair, 113 Pa., 83 (1886), was to recover damages for breach of a covenant in a lease, "to continue with due diligence and without delay to prosecute the business to success or abandonment; and, if successful, to prosecute the same, without interruption, for the common benefit of the parties." The court held that such an action could be sustained. In Kleppner vs. Lemon, there was no such covenant in the lease. Cf. James vs. Emery Oil Co., 1 Penny., 242; Blair vs. Peck, 2 Penny., 247.

Sec. 226. After Compliance with Stipulations and Reasonable Test Followed by Finding, but

Subsequent Exhaustion of Oil, Lessees not Liable for Rent.

An oil and gas lease stipulated that it was "for the sole and only purpose of drilling and operating wells and storing or transporting oil or gas to have and to hold said premises *

if

for and during the full term of twenty years." Further, that gas should be obtained in sufficient quantities and utilized, $500 per year should be paid for each and every well drilled; the lessee to complete one well within six months from date of lease; "if oil and gas or neither is found on this property within two years from date, then this lease to expire and be of no effect." The lessees completed a well within six months, found gas and utilized it; subsequently the land became exhausted, and no more gas was produced. Held, that the lessees were not liable for rent after the cessation of the production of gas and use of the well. Williams vs. Guffey, 178 Pa., 342 (1896). Cf. Harlan vs. The Lehigh Nav. Co., 35 Pa., 293.

Sec. 227. The Ohio Decisions Substantially Similar to those of Pennsylvania.

In Ohio Oil Co. vs. Harris, 1 Ohio Nisi Prius R., 132 (1894), the rulings of the Pennsylvania courts upon the obligation of lessees are followed, and the following extract from the opinion of JOHNSON, J., will be of interest.

The especial feature of the case was the danger of drainage of oil and gas through wells on adjoining lands. It was held that the lessee was required to drill such number of wells and on such places on the

leased land as would reasonably protect the land from such drainage and exhaust the quantity, though the lease was silent as to the number.

"A careful reading of these decisions convinces me that the claim made by plaintiff's counsel that, where an oil lease is silent as to the number of wells to be put down, therefore the lessor is without remedy, is not tenable. The lessor is not without remedy. The lessor (lessee) must fairly and reasonably develop the territory leased and also protect the same from wells on adjoining lands, and in case the lessee fails to do so, a court of equity will take jurisdiction, and, to the extent of the lands on which there are no wells, will declare the lease forfeited and permit the lessor to enter and drill thereon.”

Sec. 228.

In the case of Simon vs. N. W. Ohio N. G. Co., 12 Ohio C. C. R., 170 (1896), it was held, that, under the various leases and agreements involved, the defendant company should have proceeded to sink wells upon the parcel of land in question within the time fixed in the agreement, and that it had not the right to commence after the expiration of that time.

Sec. 229. Good Faith a Controlling Element.

In Ohio Oil Co. vs. Kelley, 9 O. C. C. R., 511 (1895), one John H. Hastings had granted for ten years to the Ohio Oil Company in 1890, in consideration of $1650 and one-sixth of the oil produced, a tract of land in Hancock County, embracing 165 acres; the instrument further providing that, if only gas were found, a rent of $300 per year for the product of each well, while the same was being used off the premises, should be paid. All wells were to be drilled within three years. Prior to November 11, 1892, within the

specified time, the oil company drilled seven wells on the premises and paid Hastings his proportion of the product. The oil company, however, was the owner of lands immediately adjoining the 165-acre tract, and drilled a large number of wells, some of them close to the boundary line. Hastings granted to Kelley, in October, 1894, the right to drill eight wells on said tract, they being located not nearer than 600 feet to the seven wells of the oil company. It was argued that a fair and reasonable operation of the tract, within three years and during the term, required the drilling and operation of at least eight additional wells; that it is a custom among operators to the extent of being a rule that, in order to protect the oil under the premises operated, it is absolutely necessary to drill wells close to the boundary lines of the immediate adjoining lands, especially in case the operators of said adjoining lands drill wells close to said boundary lines. Kelley commenced to drill and the oil company attempted to enjoin him; but the court refused the injunction, saying, per SENEY, J.:

"If the oil company had attempted in good faith to carry out the spirit, if not the letter, of the contract, it would be in position. to pray for the relief they ask at the hands of a court of equity; while, from what we have said and found as the facts, they did not act in good faith."

After citing the Pennsylvania authorities in point, the court say:

"If the lessee can exercise an arbitrary discretion or option by reason of paying the $1650, what is the effect? It can say, 'I will drill no wells,' or 'I will drill but one.' And the oil that is under the 165 acres, instead of coming to the surface on the 165 acres from its transitory character, would come to the surface from the wells of the Ohio Oil Company on its adjacent lands, and thus defeat a part of the consideration for which the right to the 165

acres was granted, and that defeat caused by the act of one of the parties over which the other party had no control."

Nevertheless, in Baldwin vs. Ohio Oil Co., 13 Ohio C. C. R., 519 (1897), the court, in distinguishing the case last cited, said:

"We have never gone so far yet as to adopt a general rule, or hold that the lessee shall work or develop the premises to their fullest capacity. The farthest, I think, we have gone is to hold that the lessee should make some use of the property."

The latest Ohio case in point is that of Harris vs. Ohio Oil Co., Sup. Ct., Ohio, 48 N. E. R., 502 (1897), apparently an appeal from the ruling in Sec. 227, supra, in which is expressly recognized the implied covenant on the part of the lessee to drill and operate such a number of wells as would be ordinarily required for the production of oil and to afford ordinary protection to the lines. But, says BURKET, C. 7., "the implied covenant arises only when the lease is silent on the subject."

"The extent of the development and number of wells to be drilled, and as to the protection of the lines, is often, if not usually, expressed in the lease, and that is certainly the better practice. When the extent of the development and protection of lines is provided for in the lease, there can be no implied covenant for further development and protection of lines."

Sec. 230. Covenant to Repair Tank.

A company leased a leaking oil tank, made with iron sides and a wooden bottom, the lessee agreeing, in lieu of rent, to put it in "perfectly good repair." Held, that this did not require more than putting it in as good condition as it could be made with a wooden bottom. "Repair" means to restore to its former condition, not to change either the form or material. Ardesco Oil Co. vs. Richardson, 63 Pa., 162 (1869).