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Ohio Appeals Court Overturns Trial Court in Perpetual Lease Case

The Seventh District Court of Appeals overturned the Monroe County trial court’s decision in Hupp v. Beck Energy Corporation finding that a standard oil and gas lease form was void as against public policy. The appeals court found that the delay rental provision did not allow the lease to be held in perpetuity by making nominal payments, that the phrase “capable of production” means that a well drilled on the leasehold must be capable of producing, and that where a lease allows production in paying quantities to be determined “in the judgment of the lessee” it does not allow a lessee to arbitrarily determine whether a well is capable of production because courts impose a good faith standard on the paying quantities requirement.

The appeals court made additional rulings which will be reported in a future post on Shale Energy Law Blog.