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Recent Ohio Oil and Gas Decisions

By Ilya Batikov

Over the last several weeks, Ohio courts issued a few decisions involving oil and gas issues that we wanted to briefly mention:

  • Schillo v. Chesapeake Exploration, LLC (Harrison Cty. C.P., Oct. 16, 2017) – Here, the dispute was whether the lessee properly extended an oil and gas lease through the tender of delay rental payments.  The lessee tendered the rentals by certified mail to the lessor’s known address, but the lessor apparently did not retrieve them.  Nonetheless, she claimed that the lease had expired because the lessee had failed to tender the delay rentals.  Granting summary judgment to the lessee, the common pleas court remarked that “[i]t would be moronic to allow leases to expire by simply allowing lessors to ignore tendered payment of delay rentals.”

  • Wood v. Simmers (10th Dist., Nov. 28, 2017) – In this case, the court rejected the appellant’s attempt to certify a class action appeal before the Ohio Oil and Gas Commission.  The appellant, who owned a number of wells in Ohio, appealed a determination by the Chief of the Division of Oil and Gas Resources Management requiring appellant to provide financial security through a cash or a financial instrument like surety bond, certificate of deposit, etc., rather than through a Form 3 Financial Statement.  The appellant sought to form a class of owners, who, like appellant, received a chief’s order prohibiting them from providing proof of financial responsibility through a financial statement.  The Oil and Gas Commission rejected the proposed class, and the appellate court affirmed, concluding that “[t]here is no provision in R.C. 1509.36 or elsewhere in R.C. Chapter 1509 permitting the commission to certify a class of similarly situated well owners seeking to vacate or modify a chief’s order.”
  • Fox v. Positron Energy Res., Inc. (4th Dist., Nov. 15, 2017) – In this dispute over a producing oil and gas lease dating back to the 1970s, the lessor claimed that the lessee breached the implied covenants to reasonably develop, explore, and conduct all operations affecting his royalty interest with reasonable care and due diligence.  The lessor sought the lease’s termination, or alternatively, a partial horizontal forfeiture of deeper formations.   Rejecting the lessor’s claim, the court concluded that the lease was producing in paying quantities and that the evidence did not support a finding that the lessee was unreasonable in its operation and maintenance of the lease well. The court also rejected the lessor’s attempt to obtain a forfeiture of deeper formations, finding that under its prior precedent, the lessee had no duty to explore further so long as the shallower depths were producing in paying quantities.  Lastly, the court determined that the lessor failed to provide the lessee with notice of the alleged deficiencies before filing his complaint, as required by the lease.

Check out these decisions at the links above.

Tags: Ohio, Leases, Oil and Gas, Energy, Utica, Shale

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