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7th District Reaffirms Hupp Decision Overturning Trial Court Decisions Attempting to Invalidate Oil and Gas Leases Still in Their Primary Terms

04.10.15 written by

Krugliak, Wilkins, Griffiths & Dougherty oil and gas attorneys, Scott M. Zurakowski, William G. Williams, Aletha M. Carver, and Gregory W. Watts successfully defended energy company, Beck Energy Corporation, in two significant cases in the Seventh District Court of Appeals, Bentley, et al. v. Beck Energy Corp., 2015–Ohio–1375 and Belmont Hills Country Club v. Beck Energy Corp., 2015-Ohio-1322. These decisions follow the Seventh District’s prior decision in Hupp, et al. v. Beck Energy Corp., 2014-Ohio-4255, and impact virtually every oil and gas producer (both local and national) who owns lease rights and/or is drilling in the Utica Shale.

The significance of Bently and Belmont Hills:

  • The decisions of the Belmont County Common Pleas Court (trial court) (September 16, 2013) overturned over 100 years of well-settled oil and gas case law in Ohio when it determined that the Beck Energy GT 83 Lease void ab-initio as against public policy in Ohio causing serious uncertainty to drillers and producers.
  • The Seventh District Court of Appeals’ Opinion reversed the prior trial court decisions and granted summary judgment in favor of Beck Energy.
  • Following its precedent in Hupp, the Seventh District Court of Appeals’ Opinion addressed the following main areas that lessors/landowners were using to attack and void oil and gas leases, finding:
    • The Beck Energy GT 83 Lease is not a no-term lease. It contains two distinct terms – a primary term and secondary term;
    • The Beck Energy GT 83 Lease contains no implied covenants and the fact that the lease contains language that requires a lessor to provide a lessee notice of any alleged violations, express or implied, does not create any implied covenants under the lease;
    • The ability of Beck Energy to pay delay rentals, during the primary term, does not mean the lease is a perpetual lease that can last forever;
    • The phrase “capable of production” in the sole judgment of the lessee – means the well, not the land, is capable of producing, and does not make the Lease perpetual as Beck Energy is subject to a good faith standard; and
    • The option of Beck Energy to either drill or make a delay rental during the primary term does not render the lease unenforceable due to lack of mutuality or consideration between the parties.

Founded in 1958, Krugliak, Wilkins, Griffiths & Dougherty Co., L.P.A. provides representation across various practice areas of the law: Oil, Gas & Mineral Law, Corporate and Business Law, Real Estate and Construction, Labor and Employment, Employee Benefits, Workers’ Compensation, Commercial Lending and Finance, Taxation, Health Care, Environmental Law, OSHA, Trusts and Estates, and Litigation in all areas. The Firm has over 50 attorneys with offices throughout Northeast Ohio, serving Canton, Akron, Alliance, New Philadelphia, and Sugarcreek. For more information visit www.kwgd.com.

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