Federal Circuit Court Rules In Favor of Oil and Gas Producer
The Sixth Circuit Court of Appeals ruled that unitizing a property can be sufficient to extend a lease beyond its primary term. In Henry v. Chesapeake Appalachia, the dispositive issue concerned whether “operations” were conducted on the landowner’s property prior to the lease’s expiration. The lease permitted Chesapeake to pool or unitize the landowner’s property with other land to create one or more drilling units. Chesapeake filed a Declaration and Notice of a Pooled Unit (“DPU”) which included the landowner’s property in a drilling unit and specified that production would be allocated to the lease. The Court held that the filing of the DPU was an act incidental to the endeavor to obtain production of oil and gas from the landowner’s property and constituted “operations” as defined by the lease. The Court ruled in Chesapeake’s favor finding that the lease had been extended beyond its primary term.