Wheeler and LeMaster Oil and Gas Co. v. Henley

In Wheeler and LeMaster Oil and Gas Co. v. Henley, Ky., 398 S.W.2d 475 (1965) the issue facing Kentucky's highest court, was whether a two year, four month delay in production was sufficiently unreasonable to terminate a lease that contained a habendum clause which provided that the lease would remain in force as long as oil or gas was produced from the property. The Court took notice of the fact that the lessor had not received any royalty payments in ten years, that it was no longer profitable to operate the lease using primary recovery efforts, and that the lessee had refused two offers to have the property "water flooded." In finding that the delay was unreasonable, the Court recognized "a strong policy against a lessee holding land for an unreasonable length of time simply for speculative purposes, or because of a lack of due diligence, where the lessor's only revenue results from royalty payments received from continued production." (398 S.W.2d at 477.)