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Ohio Decision Results in Victory for Oil and Gas Producers

An Ohio trial court issued a decision in Marshall v. Beekay Company. The case involved an action seeking declaratory judgment as to leasehold rights for formations below the Germantown Sand Formation. The court ruled that there was no breach of the implied covenant to reasonably develop, or actual abandonment, of the rights to deeper geological formations when production was only found in “paying quantities” for formations located above the Germantown Sand Formation. The ruling is important for oil and gas producers against landowners seeking to terminate those portions of oil and gas leases covering the rights to deeper geological formations because of an alleged breach of the implied covenant to reasonably develop them when only shallower formations are being explored and produced.