Part 1 of “What is this Thing Called Lease” is the first installment of a series of articles discussing a significant development in the nature of oil and gas leases in Ohio. Since the most recent oil and gas “boom” began a several years ago, many long-standing oil and gas leases have become the subject of litigation, and the very nature of the oil and gas lease has been called into question.
Currently, there are at least five cases in Ohio in which the Common Pleas Court has granted summary judgment in favor of the lessors and determined that the oil and gas lease(s) at issue was void ab initio. The first of these decisions, and, arguably the root of these decisions, was the July 12, 2012, ruling issued by Judge Edward Lane in Hupp v. Beck Energy Corporation, Monroe C.P. No. 2011-345. The Hupp decision held that such leases are effectively “no-term” leases that “clearly, unequivocally and seriously offend public policy in that they are perpetual leases that, by their term and the payment of a nominal delayed rental may never have to be put into production.” (Decision, p. 15). Judge Lane accordingly held that the leases were void ab initio, making forfeiture the appropriate remedy. An appeal is pending (7th District Court of Appeals, Case No. 13 MO 2).
Four other cases, Bohlen v. Anadarko E&P Onshore LLC (Case No. 13-OT-167 (Washington County, C.P. March 27, 2014)), Bentley v. Beck Energy Corporation (Case No. 11-CV-513 (Belmont County C.P. September 16, 2013)), Oxford Oil Company v. West (Case No. 11-CV-435 (Belmont County C.P. September 16, 2013)) and Belmont Hills Country Club v. Beck Energy Corporation, (Case No. 11-CV-290 (Belmont County C.P., July 8, 2013)) followed thereafter.
In each case, the oil and gas lease(s) was determined to be a “perpetual, no-term lease” and was declared “void ab initio.” Each Common Pleas Court made this determination despite the line of Ohio case law opining that an oil and gas lease is a determinable fee interest and, therefore, is of potentially infinite duration.
This series traces the development of the law of oil and gas leases in Ohio in light of the potential impact the ultimate resolution of this public policy-based forfeiture may have.