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The Ohio Supreme Court Agrees to Hear Appeal Impacting All Oil & Gas Producers Leasing and/or Drilling in the Utica Shale

01.28.15 written by

Following the successful defense by Krugliak, Wilkins, Griffiths & Dougherty oil and gas attorneys, Scott M. Zurakowski, William G. Williams, Aletha M. Carver and Gregory W. Watts of an energy company, Beck Energy Corporation, in Hupp, et al. v Beck Energy Corp., 2014–Ohio–4255, the Ohio Supreme Court has accepted an appeal filed by lessors/landowners against Beck Energy Corporation. 

Originally, the Monroe County Common Pleas Court (Trial Court) (July 31, 2013, February 8, 2013, and June 10, 2013) overturned over 100 years of well-settled oil and gas case law in Ohio causing serious uncertainty to producers when it granted summary judgment in favor of the lessors/landowners determining Beck Energy Corporation’s G&T 83 Lease void ab-initio as against public policy in Ohio. The Seventh District Court of Appeals’ Opinion (September 26, 2014) reversed the trial court and found in favor of Beck Energy Corporation that the leases were in full force and effect. 

The Ohio Supreme Court has agreed to hear the following propositions advanced by the lessor/landowners:

  1. An oil and gas lease that can be maintained indefinitely without development is a perpetual lease that is void as against public policy. That a lease purports to establish a fixed term is of no consequence if the duration of that term can be extended without development; and
  2. Where the express terms of an oil and gas lease effectively allow the lessee to postpone development indefinitely, and any stated time limits can be unilaterally extended by the lessee in perpetuity without any development, the lease is subject to an implied covenant of reasonable development notwithstanding a general disclaimer of all implied covenants.

The Seventh District Court of Appeals’ Opinion found in favor of Beck Energy Corporation, holding:

  • The Beck Energy Corporation G&T 83 Lease is not a no-term lease. It contains two distinct terms – a primary term and secondary term;
  • The Beck Energy Corporation G&T 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 express or implied obligation, does not create any implied covenants under the lease;
  • The ability of Beck Energy Corporation 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 – does not mean the Lease is a perpetual lease as Beck Energy Corporation is subject to a good faith standard; and
  • The phrase “capable of production” means the well, not the land, is capable of production. 

Krugliak, Wilkins, Griffiths & Dougherty’s oil and gas attorneys will continue to vehemently defend the rights of Beck Energy Corporation. 

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. If you have any questions concerning this Press Release, please contact Attorney Scott M. Zurakowski at 330-497-0700. 

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