Legal Definitions - reasonable-development covenant

A reasonable-development covenant is a promise made in an oil-and-gas lease that the lessee will continue to develop the property in a reasonable manner once production is obtained. This means that the lessee cannot simply hold onto the lease by the production already obtained, but must continue to explore and develop the property as a reasonably prudent operator would.

For example, if a company leases land for oil and gas exploration and successfully drills a well that produces oil, they are obligated to continue developing the property by drilling additional wells and exploring other areas of the property for potential production. They cannot simply sit on the lease and collect royalties from the existing well.

The reasonable-development covenant is important because it ensures that the property is being developed in a responsible and efficient manner, maximizing the potential for oil and gas production and benefiting both the lessee and the lessor.