Legal Definitions - protection covenant

A protection covenant is a promise made in an oil-and-gas lease that the lessee will take measures to protect the property against the loss of oil and gas by drainage from the producing reservoir. This is done by drilling one or more offsetting wells.

For example, if a company leases a piece of land for oil and gas exploration and discovers a producing reservoir, they are obligated to drill additional wells to prevent the loss of oil and gas due to drainage. This covenant only applies if a reasonably prudent operator would drill the additional wells.

The protection covenant is important because it ensures that the lessor (the owner of the land) is not deprived of the full value of the oil and gas reserves due to drainage. It also encourages responsible drilling practices that minimize the environmental impact of oil and gas exploration.