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Ohio Supreme Court Accepts Major Oil and Gas Lease Busting Case for Review

The Ohio Supreme Court accepted jurisdiction over Hupp v. Beck Energy, an important Ohio case involving the interpretation of oil and gas leases. The case involves a challenge by landowners in Monroe County to a standard form oil and gas lease. The landowners argued that the leases could be maintained indefinitely without development of the oil and gas and, as a result, were void against public policy. The Monroe County trial court agreed and granted the landowner’s Motion for Summary Judgment finding the leases were void ab initio. On appeal, the Seventh District Court of Appeals reversed the trial court finding that the leases have two distinct terms – a primary term and secondary term – and were not “no term” or perpetual leases. The Seventh District also ruled that the leases’ delay rental provision did not allow the lessee to extend the lease indefinitely by the payment of delay rentals.

The Propositions of Law to be reviewed by the Ohio Supreme Court are (1) whether an oil and gas lease which can be maintained indefinitely without development is a perpetual lease that is void against public policy and (2) whether the leases are subject to an implied covenant of reasonable development notwithstanding a general disclaimer of all implied covenants.

Shale Energy Law Blog will continue to post updates to the case including the scheduling of oral argument.