Landowners of hundreds of oil and gas leases in Ohio’s Belmont and Monroe Counties were granted a motion for class certification in Monroe County Common Pleas Court recently. Washington County Judge Norman Edward Lane, Jr. of Marietta, Ohio who made the decision was assigned to the case by the Ohio Supreme Court. The court also held inHupp v. Beck Energy Corp. that the landowners’ oil and gas leases were “void ab initio”—invalid from the outset–because they were of an indefinite duration and therefore against public policy in Ohio.
In another development, after plaintiffs (three landowners) filed their motion for class certification, XTO Energy, a subsidiary of ExxonMobil Corp., filed a motion to intervene in the action because the deep drilling rights to the land had been sold to XTO in December 2011. XTO’s motion was denied by the Common Pleas Court because it said all of the parties with interest in the leases were parties to the lawsuit when it was filed and XTO was not a necessary party. XTO also had notice of the litigation and its potential consequences when it acquired the deep drilling rights.
The Court found the individual joinder of all parties in the suit was impractical as there were 600 to 700 plaintiffs and the leases were virtually identical except for names, addresses of the lessors, date of the lease, etc. The existence of questions of law and fact common to the class make class action the appropriate vehicle for the landowners’ challenge against Beck.
The Hupp court relied upon 1983 and 1992 Ohio Supreme Court decisions (Ionno v. Glen-Gery Corp. and Newbury Twp. Bd. Of Trustees v. Lomak Petroleum, Inc.) and found the Beck leases to be no-term leases which bestowed upon the lessees the universal right to extend in perpetuity the time within which to develop the leased premises.
As there had been no development of plaintiffs’ acreage over a period of years, the leases are unenforceable against public policy, the judge ruled. It is the public policy of the state of Ohio to encourage oil and gas production. Ohio landowners also have a “correlative right” under Ohio law to recover and receive the oil and gas under their tracts of land.
Although the lessees made annual payments to the landowners over a period of 18 years, the court said this did not alter their responsibility to develop the land within a reasonable time and cannot be viewed as a substitute for timely development. The trial court forfeited all of Beck Energy’s rights to the to the oil and gas located under the plaintiff’s properties.
Both Beck and XTO have taken the trial court decisions in the case to the Ohio Court of Appeals.
If you are involved in a dispute over an oil and gas lease in Ohio or are uncertain of your rights, please contact Slater & Zurz LLP for a free consultation by calling 1-888-727-9017 or by sending the law firm a message via the FREE CASE REVIEW form.
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You don’t have to be involved in a dispute about an oil and gas lease to seek our help. Leasing oil and gas mineral rights can be very lucrative and Ohio landowners are currently the target of exploration companies looking to acquire rights to oil and gas deposits. There are many issues to evaluate and consider before entering into an oil and gas lease to protect yourself, your land and your future rights.