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Ohio Court of Appeals Holds Assignment of Shallow Rights Does Not Sever Lease

The Fourth District Court of Appeals held in Marshall v. Beekay Company that continuous production from shallow wells pursuant to two oil and gas leases holds the deep rights to the property. The landowners in the case claimed that an assignment of the shallow rights of the oil and gas leases split the oil and gas estate into two different pieces — shallow and deep. Although there was continuous production from the shallow wells, there was no production from the deeper oil and gas formations. The landowners argued that reservation of the deep rights created an obligation of reasonable development of the deep rights. The court disagreed holding that the assignment does not sever the lease because it granted all of the oil and gas rights under the acreage at issue for so long as oil and gas was producted in paying quantities. The court concluded that the granting clause of the lease included all oil and gas at all depths and the deep rights to the property were held by the production from the shallow wells.