On appeal, Court of Appeals reversed. First, the court noted that “Under Ohio law, a free gas clause is construed as covenant running with the surface ownership of the leasehold tract unless a contrary intention appears in the wording of the instrument.” , 2011 WL 6917588 at 4. Next, the court observed that the express language of the 1978 Lease, which stated that “the occupants of the [farmhouse] shall be entitled to 250,000 cubic feet per annum of free gas for domestic use….”, was compelling. Id
Over the past decade, oil and gas production in Ohio has boomed. Thanks in no small part to the Utica shale play, Ohio has become the sixth largest natural gas producer in the United States. As gas production has increased, Ohio courts have increasingly found themselves in the middle of litigation related to natural gas, including disputes about oil-and-gas leases between producers and lessors. Through their decisions on these disputes, Ohio courts are molding the state’s oil-and-gas law. The U.S. Dis
In its most recent decision, the lower court indeed applied Ohio’s general rules of contract construction, focusing on the parties’ intent and whether the language of the lease was ambiguous. If the lease’s language was ambiguous, it would be appropriate to consider external circumstances, such as the acts of the parties subsequent to the execution of the contract. For example, the Court could have considered that the operator failed to apply any post-production cost deductions to the land
With the key question still unanswered, Chesapeake moved again for judgment on all the “at the well” leases, asking the District Court to determine how the royalties should be calculated. On Oct. 25, 2017, Judge Sara Lioi granted Chesapeake’s motion. The court focused on two issues: ambiguity and intent.
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