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Invalidation of Oil and Gas Leases In Ohio

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Over the past year, a number of State and Federal courts in Ohio have issued rulings invalidating oil and gas leases. One court even certified a state-wide class action for lessors whose leases contain a particular lease provision which was the basis for the invalidation decision. In most of the decisions, fairly standard and widely-used lease provisions have been the court’s impetus to conclude that the lease is invalid because the secondary term is perpetual and therefore void as against public policy. In many of the cases the declaration of invalidity has come during the primary term of the lease.

Most of these trial court decisions have been appealed to the Seventh District Court of Appeals (which includes Belmont, Carroll, Columbiana, Harrison, Jefferson, Mahoning, Monroe and Noble Counties) and we do not expect to see any appellate decisions until well into 2014. Moreover, because of the significance of the issues, it is likely that intermediate appellate decisions will be further appealed to the Supreme Court of Ohio. Therefore, the ultimate legal validity in Ohio of leases which contain certain standard provisions which are at issue in these cases will be uncertain for quite some time.

It is important for the industry to be aware of this current state of uncertainty, because it will impact sales and acquisitions of Ohio oil and gas leases until finally resolved by The Supreme Court of Ohio. In the meantime, our energy attorneys at Steptoe & Johnson PLLC are involved with and knowledgeable about this litigation, so if you have specific questions or concerns, please contact us.

Click here to view several of the trial court rulings connected to this issue.

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