November 13, 2014 Articles

Operations under Ohio Oil and Gas Leases

The exact contours of what constitutes operations and what an implied covenant to develop looks like in Ohio are not clear.

By Stephanie Burt – November 13, 2014

Recently Ohio has seen a great deal of oil and gas lease disputes. One of the most common challenges brought by lessors is an action seeking to invalidate or terminate an oil and gas lease on the basis that the lease expired at the end of the primary term. Typically, the lessors seek to invalidate the oil and gas lease based on the belief that the conditions of the habendum clause were not satisfied so the lease could not have transitioned to the secondary term. This type of lease dispute usually boils down to the question of whether sufficient operations occurred on the leased property.

Historically, the standard for commencing operations in Ohio sufficient to keep a lease from expiring and hold it into its secondary term has been satisfied by preparatory actions such as surveying a well site, ground clearing, staking a well, or filing certain documents with the required government agencies. See, e.g.Kaszar v. Meridian Oil & Gas Enters., Inc., 499 N.E.2d 3, 4 (Ohio Ct. App. 1985). Recently, state and federal courts in Ohio have weighed in, elaborating on the standard and what is required for a lessee to hold an oil and gas lease into the secondary term.

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