The Ohio Supreme Court was asked to decide whether Ohio follows the "at the well" rule, which permits the deduction of post-production costs from landowner royalty checks, or if the state follows the "marketable product" rule, which limits the deduction of post-production costs under certain circumstances. The court ruled saying in so many words, "We're not deciding." In other words, each royalty case should be litigated individually, case-by-case, in a trial court.
OH 7th District Court of Appeals Decision in Hupp v. Beck Energy CorpMarcellus Drilling News
The Seventh District Court of Appeals in Ohio overturned a lower court ruling and ruled in favor of Beck Energy Corp and XTO Energy, a major victory for the drillers and major defeat for the landowners in Monroe and Belmont counties who say their land never got drilled and they wanted to re-sign with another company.
An important Dormant Minerals Right Act (DMA) case before the Ohio Supreme Court. The Court held that under the DMA: (1) a recorded oil and gas lease is a title transaction that serves as a savings event that prevents minerals from being abandoned to a surface owner; but (2) that the unrecorded expiration of an oil and gas lease is not a savings event.
Decision by U.S. District Judge David N. Hurd on Force Majeure Case in New Yo...Marcellus Drilling News
A decision issued by Judge David Hurd in a case of landowners from Broome and Tioga Counties in New York State against Chesapeake Energy and Statoilhydro. Chesapeake is attempting to extend leases on property for gas drilling claiming that the moratorium in New York has stopped them from drilling. Landowners claim the leases were signed long before horizontal hydraulic fracturing of shale was done and that Chesapeake could have drilled, conventionally, any time they chose to.
The Ohio Supreme Court decision in a case that started with three landowners and was later turned into a class action. The case claimed that landowner leases with Beck Energy Corp. were void and should be terminated because Beck never drilled wells on their property and that a provision allowing Beck to pay a nominal delay fee was against public policy. A lower court agreed, but it was overturned by an appeals court and now, the appeals court decision stands as ruled by the Supreme Court.
Decision from the Ohio Supreme Court in a case dealing with the important issue of interpreting the Dormant Mineral Rights Act in Ohio. There are two DMAs in Ohio--one passed in 1989 that went into effect in 1992, and another in 2006 which added certain additional procedural requirements to the 1989 version. This decision and several others, handed down Sept. 15, 2016, rule on which version of the DMA takes precedence when it comes to mineral rights ownership.
Decision from the Ohio Supreme Court in a case dealing with the important issue of interpreting the Dormant Mineral Rights Act in Ohio. There are two DMAs in Ohio--one passed in 1989 that went into effect in 1992, and another in 2006 which added certain additional procedural requirements to the 1989 version. This decision and several others, handed down Sept. 15, 2016, rule on which version of the DMA takes precedence when it comes to mineral rights ownership.
This is a casenote I wrote concerning the tenuous balance between public domain works and the Foreign Works Restoration Act, which essentially takes foreign works out of the public domain in the US and "re-copyrights" them, essentially upending the federal copyright regime.
Decision from the Ohio Supreme Court in a case dealing with the important issue of interpreting the Dormant Mineral Rights Act in Ohio. There are two DMAs in Ohio--one passed in 1989 that went into effect in 1992, and another in 2006 which added certain additional procedural requirements to the 1989 version. This decision and several others, handed down Sept. 15, 2016, rule on which version of the DMA takes precedence when it comes to mineral rights ownership.
OH 7th District Court of Appeals Decision in Hupp v. Beck Energy CorpMarcellus Drilling News
The Seventh District Court of Appeals in Ohio overturned a lower court ruling and ruled in favor of Beck Energy Corp and XTO Energy, a major victory for the drillers and major defeat for the landowners in Monroe and Belmont counties who say their land never got drilled and they wanted to re-sign with another company.
An important Dormant Minerals Right Act (DMA) case before the Ohio Supreme Court. The Court held that under the DMA: (1) a recorded oil and gas lease is a title transaction that serves as a savings event that prevents minerals from being abandoned to a surface owner; but (2) that the unrecorded expiration of an oil and gas lease is not a savings event.
Decision by U.S. District Judge David N. Hurd on Force Majeure Case in New Yo...Marcellus Drilling News
A decision issued by Judge David Hurd in a case of landowners from Broome and Tioga Counties in New York State against Chesapeake Energy and Statoilhydro. Chesapeake is attempting to extend leases on property for gas drilling claiming that the moratorium in New York has stopped them from drilling. Landowners claim the leases were signed long before horizontal hydraulic fracturing of shale was done and that Chesapeake could have drilled, conventionally, any time they chose to.
The Ohio Supreme Court decision in a case that started with three landowners and was later turned into a class action. The case claimed that landowner leases with Beck Energy Corp. were void and should be terminated because Beck never drilled wells on their property and that a provision allowing Beck to pay a nominal delay fee was against public policy. A lower court agreed, but it was overturned by an appeals court and now, the appeals court decision stands as ruled by the Supreme Court.
Decision from the Ohio Supreme Court in a case dealing with the important issue of interpreting the Dormant Mineral Rights Act in Ohio. There are two DMAs in Ohio--one passed in 1989 that went into effect in 1992, and another in 2006 which added certain additional procedural requirements to the 1989 version. This decision and several others, handed down Sept. 15, 2016, rule on which version of the DMA takes precedence when it comes to mineral rights ownership.
Decision from the Ohio Supreme Court in a case dealing with the important issue of interpreting the Dormant Mineral Rights Act in Ohio. There are two DMAs in Ohio--one passed in 1989 that went into effect in 1992, and another in 2006 which added certain additional procedural requirements to the 1989 version. This decision and several others, handed down Sept. 15, 2016, rule on which version of the DMA takes precedence when it comes to mineral rights ownership.
This is a casenote I wrote concerning the tenuous balance between public domain works and the Foreign Works Restoration Act, which essentially takes foreign works out of the public domain in the US and "re-copyrights" them, essentially upending the federal copyright regime.
Decision from the Ohio Supreme Court in a case dealing with the important issue of interpreting the Dormant Mineral Rights Act in Ohio. There are two DMAs in Ohio--one passed in 1989 that went into effect in 1992, and another in 2006 which added certain additional procedural requirements to the 1989 version. This decision and several others, handed down Sept. 15, 2016, rule on which version of the DMA takes precedence when it comes to mineral rights ownership.
OH Supreme Court Decision: State ex rel. Morrison v. Beck Energy Corp.Marcellus Drilling News
Decision by the Ohio Supreme Court in a case striking down so-called "home rule" laws in which local municipalities try to prevent shale drilling by enacting local zoning regulations. The court found that according to OH law, the state and only the state may regulate where and when drilling is done. A huge victory for both landowners and the shale industry in the Buckeye State.
Payment of Delay Rentals Alone Cannot Extend Lease Into Secondary TermRobert Burnett
The Pennsylvania Superior Court recently addressed the issue of whether the mere payment of delay rentals
can extend a gas lease beyond its primary term. In Hite v. Falcon Partners, et al., 2011 WL 9632 (January 4,
2011), the Superior Court rejected the gas producer’s argument that a non-producing lease can be preserved
indefinitely simply by making delay rental payments. In siding with the landowner, the Superior Court affirmed
the trial court’s cancellation of the non-producing lease and sent a clear warning to gas operators throughout
the Commonwealth. Following Hite, there is no question that the so-called “automatic termination rule” is
alive and well in Pennsylvania. As such, landowners and gas operators alike should carefully review the Hite
decision and its potential impact on non-producing leases.
California State Lands Commission - City of Hermosa Beach State Tidelands TrustStopHermosaBeachOil
This letter is in response to the September 2, 2014, request from your office on behalf of the City of Hermosa Beach (City) memorializing the request made by the City Council during its July 8, 2014 Council meeting for information from the California State Lands Commission (Commission) staff regarding the City's responsibilities as a trustee of granted public trust lands.
U.S. District Court Decision Against Chesapeake & Inflection on Force Majeure...Marcellus Drilling News
The decision handed down by U.S. District Court Judge David Hurd that found Chesapeake Energy and Inflection Energy could not extend land leases beyond the original term because of the drilling moratorium in New York State. Chespeake & Inflection claimed the moratorium prevented them from drilling, but the judge ruled they could have still drilled conventional, vertical wells.
Chamber of Commerce report that asks and answers the important question: What would happen if the U.S. was forced to pay Europe’s high prices for energy? Hint: It ain't pretty.
Report: Analysis of Act 13 Spending by Pennsylvania Municipalities and CountiesMarcellus Drilling News
A pair of University of Pittsburgh at Bradford professors received a grant to study the question of whether or not local towns and municipalities that receive Act 13 impact fee revenue are using that revenue for the purposes they were meant to use it. The study found that yeah, towns are using the money wisely, what they are supposed to be using it for. But the study also found it's difficult to trace every penny, so the prof recommend better reporting guidelines be used when doling out the money in future.
Schedule 13D - Stone Energy Corporation - Largest Shareholder Opposes Bankrup...Marcellus Drilling News
Stone Energy's largest investor, Thomas Satterfield, owns 9.9% of the company's stock. He doesn't want to see that stock turned into toilet paper by handing the keys over to debtholders under the current bankruptcy plan. He filed this report with the SEC opposing Stone's existing plan.
WV Supreme Court Decision Disallowing Survey Access for Mountain Valley PipelineMarcellus Drilling News
A West Virginia Supreme Court decision in Mountain Valley Pipeline v. Brian and Doris McCurdy. Mountain Valley needs survey access in order to scope out a route for the pipeline. Some landowners are resisting survey access and don't want the pipeline built across their land. Mountain Valley claimed eminent domain powers in order to conduct surveys. The high court has disagreed, leaving the project in a lurch. They must complete the route survey in order to get the project approved by the Federal Energy Regulatory Commission.
Pipeline Safety Alert: PHMSA Releases Emergency Order Interim Final RuleMarcellus Drilling News
A summary of the new IFR (Interim Final Rule) issued by the Pipeline & Hazardous Materials Safety Administration (PHMSA) granting the Secretary of the Dept. of Transportation broad new powers to bypass laws and regulations and make fiat decisions if he/she believes the public is in danger with respect to a pipeline.
A poll commissioned by the American Petroleum Institute on election day, Nov. 8, 2016, to ask voters what role energy played in their vote decision-making. The poll found that energy was a very important issue and played a huge role in putting Donald Trump in the White House.
A list of the companies nominated to receive an award in recognition for excellence during 2016. The awards are issued at a gala event in March in Pittsburgh.
EPA: Control Techniques Guidelines for the Oil and Natural Gas IndustryMarcellus Drilling News
New ozone "guidelines" for oil and natural gas systems, to supposedly reduce smog-forming emissions in large population centers. The new guidelines are not, the EPA says, required regulations (yet), but only "recommendations for state and local air agencies to consider as they determine what emissions limits to apply to covered sources in their jurisdictions."
FERC Order Denying Rehearing Requested by NY AG Schneiderman re Constitution ...Marcellus Drilling News
New York Attorney General Eric Scheiderman requested the Federal Energy Regulatory Commission rehear and investigate the matter of tree clearing in NY along the proposed path of the Constitution Pipeline (still not built). Schneiderman alleged the Constitution should have prevented landowners from clearing trees on their own property ahead of the pipeline's approval by Lord Cuomo. FERC told Schneiderman to get lost--no rehearing of the matter.
Annual natural gas report from the U.S. Energy Information Administration. Chock full of great charts and graphs and data, laying out production, imports and exports of natural gas in the U.S.
Decision in a case appealed by the family of a rig worker who died in an accident drilling a well for Atlas Energy in Greene County, PA in 2007. The court found that Atlas is immune from any claims of negligence because the man killed worked for a subcontractor who was hired to drill the well. That is, if there was negligence, that negligence is on the part of the man's employer, not Atlas.
OH Supreme Court Decision: State ex rel. Morrison v. Beck Energy Corp.Marcellus Drilling News
Decision by the Ohio Supreme Court in a case striking down so-called "home rule" laws in which local municipalities try to prevent shale drilling by enacting local zoning regulations. The court found that according to OH law, the state and only the state may regulate where and when drilling is done. A huge victory for both landowners and the shale industry in the Buckeye State.
Payment of Delay Rentals Alone Cannot Extend Lease Into Secondary TermRobert Burnett
The Pennsylvania Superior Court recently addressed the issue of whether the mere payment of delay rentals
can extend a gas lease beyond its primary term. In Hite v. Falcon Partners, et al., 2011 WL 9632 (January 4,
2011), the Superior Court rejected the gas producer’s argument that a non-producing lease can be preserved
indefinitely simply by making delay rental payments. In siding with the landowner, the Superior Court affirmed
the trial court’s cancellation of the non-producing lease and sent a clear warning to gas operators throughout
the Commonwealth. Following Hite, there is no question that the so-called “automatic termination rule” is
alive and well in Pennsylvania. As such, landowners and gas operators alike should carefully review the Hite
decision and its potential impact on non-producing leases.
California State Lands Commission - City of Hermosa Beach State Tidelands TrustStopHermosaBeachOil
This letter is in response to the September 2, 2014, request from your office on behalf of the City of Hermosa Beach (City) memorializing the request made by the City Council during its July 8, 2014 Council meeting for information from the California State Lands Commission (Commission) staff regarding the City's responsibilities as a trustee of granted public trust lands.
U.S. District Court Decision Against Chesapeake & Inflection on Force Majeure...Marcellus Drilling News
The decision handed down by U.S. District Court Judge David Hurd that found Chesapeake Energy and Inflection Energy could not extend land leases beyond the original term because of the drilling moratorium in New York State. Chespeake & Inflection claimed the moratorium prevented them from drilling, but the judge ruled they could have still drilled conventional, vertical wells.
Chamber of Commerce report that asks and answers the important question: What would happen if the U.S. was forced to pay Europe’s high prices for energy? Hint: It ain't pretty.
Report: Analysis of Act 13 Spending by Pennsylvania Municipalities and CountiesMarcellus Drilling News
A pair of University of Pittsburgh at Bradford professors received a grant to study the question of whether or not local towns and municipalities that receive Act 13 impact fee revenue are using that revenue for the purposes they were meant to use it. The study found that yeah, towns are using the money wisely, what they are supposed to be using it for. But the study also found it's difficult to trace every penny, so the prof recommend better reporting guidelines be used when doling out the money in future.
Schedule 13D - Stone Energy Corporation - Largest Shareholder Opposes Bankrup...Marcellus Drilling News
Stone Energy's largest investor, Thomas Satterfield, owns 9.9% of the company's stock. He doesn't want to see that stock turned into toilet paper by handing the keys over to debtholders under the current bankruptcy plan. He filed this report with the SEC opposing Stone's existing plan.
WV Supreme Court Decision Disallowing Survey Access for Mountain Valley PipelineMarcellus Drilling News
A West Virginia Supreme Court decision in Mountain Valley Pipeline v. Brian and Doris McCurdy. Mountain Valley needs survey access in order to scope out a route for the pipeline. Some landowners are resisting survey access and don't want the pipeline built across their land. Mountain Valley claimed eminent domain powers in order to conduct surveys. The high court has disagreed, leaving the project in a lurch. They must complete the route survey in order to get the project approved by the Federal Energy Regulatory Commission.
Pipeline Safety Alert: PHMSA Releases Emergency Order Interim Final RuleMarcellus Drilling News
A summary of the new IFR (Interim Final Rule) issued by the Pipeline & Hazardous Materials Safety Administration (PHMSA) granting the Secretary of the Dept. of Transportation broad new powers to bypass laws and regulations and make fiat decisions if he/she believes the public is in danger with respect to a pipeline.
A poll commissioned by the American Petroleum Institute on election day, Nov. 8, 2016, to ask voters what role energy played in their vote decision-making. The poll found that energy was a very important issue and played a huge role in putting Donald Trump in the White House.
A list of the companies nominated to receive an award in recognition for excellence during 2016. The awards are issued at a gala event in March in Pittsburgh.
EPA: Control Techniques Guidelines for the Oil and Natural Gas IndustryMarcellus Drilling News
New ozone "guidelines" for oil and natural gas systems, to supposedly reduce smog-forming emissions in large population centers. The new guidelines are not, the EPA says, required regulations (yet), but only "recommendations for state and local air agencies to consider as they determine what emissions limits to apply to covered sources in their jurisdictions."
FERC Order Denying Rehearing Requested by NY AG Schneiderman re Constitution ...Marcellus Drilling News
New York Attorney General Eric Scheiderman requested the Federal Energy Regulatory Commission rehear and investigate the matter of tree clearing in NY along the proposed path of the Constitution Pipeline (still not built). Schneiderman alleged the Constitution should have prevented landowners from clearing trees on their own property ahead of the pipeline's approval by Lord Cuomo. FERC told Schneiderman to get lost--no rehearing of the matter.
Annual natural gas report from the U.S. Energy Information Administration. Chock full of great charts and graphs and data, laying out production, imports and exports of natural gas in the U.S.
Decision in a case appealed by the family of a rig worker who died in an accident drilling a well for Atlas Energy in Greene County, PA in 2007. The court found that Atlas is immune from any claims of negligence because the man killed worked for a subcontractor who was hired to drill the well. That is, if there was negligence, that negligence is on the part of the man's employer, not Atlas.
The monthly Short-Term Energy Outlook (STEO) from the U.S. Energy Information Administration for December 2016. This issue makes a couple of key points re natural gas: (1) EIA predicts that natural gas production in the U.S. for 2016 will see a healthy decline over 2015 levels--1.3 billion cubic feet per day (Bcf/d) less in 2016. That's the first annual production decline since 2005! (2) The EIA predicts the average price for natural gas at the benchmark Henry Hub will climb from $2.49/Mcf (thousand cubic feet) in 2016 to a whopping $3.27/Mcf in 2017. Why the jump? Growing domestic natural gas consumption, along with higher pipeline exports to Mexico and liquefied natural gas exports.
PennEast Pipeline Response to NJDRC Comments Against Pipeline ProjectMarcellus Drilling News
PennEast Pipelines response to analysis provided to the Federal Energy Regulatory Commission by the New Jersey Division of the Rate Council (NJDRC). The NJDRC told FERC that PennEast isn't needed and questioned its cost recovery rate. PennEast responded to that analysis with an independent report written by Concentric Energy Advisors, which refutes (i.e. obliterates) the "incorrect assumptions" made in the NJDRC comments to FERC.
MSC Lawsuit Filed in PA Commonwealth Court Against Chapter 78a Drilling Regul...Marcellus Drilling News
A lawsuit filed by the Marcellus Shale Coalition against the PA Dept. of Environmental Protection questioning several pieces of the new Chapter 78a drilling regulations adopted by the DEP. The lawsuit does not seek to overturn the entire set of rules--just certain fuzzy aspects of the rules.
The original articles of incorporation with amendments for the Delaware Riverkeeper nonprofit "charity". The organization is, according to its charter, "restoring the Delaware River Watershed's natural balance where it has been lost and ensuring its preservation where it still exists." Yet the organization is using its money and personnel to interfere in fracking in parts of Pennsylvania (and other states) that have nothing to do with the Delaware River Basin. They are in violation of their own charter and therefore (in our opinion) in violation of their tax-exempt status.
The Equity Research - North America operation of Deutsche Bank attended the Platts 9th Annual Appalachian Oil & Gas Conference in Pittsburgh earlier this week. This is the writeup/takeaways from the event.
US Court of Appeals for the Third Circuit - Pollock v Energy Corporation of A...Marcellus Drilling News
On Monday, October 24, 2016, the Third Circuit Court of Appeals found that ECA did not meet its burden of proving its need for a new trial in the case involving a $1.1 million judgment to landowners. The landowners sued ECA in federal court in 2010, alleging they did not receive their proper amount of royalties under their leases because allegedly improper post-production costs were deducted. The District Court jury awarded $1.1 million in damages. ECA appealed the verdict to the Third Circuit.
Sixth Circuit Court of Appeals Decision in Harper v Muskingum Watershed Conse...Marcellus Drilling News
Anti-drilling landowners (backed by Food & Water Watch) claimed the Muskingum Watershed Conservancy District had violated the deed to the land it owns by leasing that land for Utica Shale drilling. The Sixth Circuit dismissed the case. The anti-drillers lost.
PPA Commonwealth Court Case Ruling New Chapter 78a Drilling Rules are Cleared...Marcellus Drilling News
PA Commonwealth Court Case that ruled the Dept. of Environmental Protection's (DEP) final Chapter 78a Marcellus Drilling regulations are cleared to begin--that there is no legal reason to stop publication and adoption of the new regulations. PIOGA is opposing the new regulations.
A new report just issued by the New England Coalition for Affordable Energy says New England is at a much greater risk for higher energy costs in the short-term because of lack of new pipelines.
The Superior Court of Pennsylvania recently sided with a lessee in a class action royalty dispute. In Hall v. CNX Gas Co., LLC, the lease contained a royalty provision providing that royalties were to be calculated on the net amount realized at the point of sale.
An Ohio landowner whose land Sunoco Logistics Partners wants to traverse with the Mariner East 2 pipeline tried a novel legal argument. The landowner's attorneys argued in the Ohio Seventh District Court of Appeals that pure propane and pure butane--both of which would be transported through the pipeline from eastern Ohio all the way to the Marcus Hook refinery near Philadelphia--are not "petroleum." At least, not petroleum for the purposes of the permit which grants Sunoco the right to build the pipeline to transport petroleum products. The Court of Appeals justices rejected that argument and said, in essence, that propane and butane fit under the definition of petroleum as that word has been used for generations. This is the court's ruling.
A court case in which a landowner in Ohio sued to cancel a lease because the driller and the company that owns the lease have not paid any royalties since drilling. The Fifth Appellate District Court of Ohio found that because a specific provision in the original lease does not provide for cancellation due to non-payment of royalties, the landowners will have to continue to get screwed.
An ebook published by the law firm Porter Wright Morris & Arthur LLP. Contains several blog posts they've published on the topic of oil and gas lease issues for landowners. Our favorite article: My Sister is a Fractivist and Won’t Sign an Oil and Gas Lease. What Can We Do?
Loughman v EQT - Decision Rejecting Landowner Request to Sever Production Lea...Marcellus Drilling News
A case in which a Greene County, PA landowner requested the court sever production rights under a lease from storage right. The landowners say EQT never produced oil/gas from the property, and lack of production cancels that portion of the lease. PA Superior Court said no, the two are together in the same lease and one OR the other is enough to keep the lease enforceable.
A copy of the lawsuit filed Sept. 15, 2011 by landowner and resident of the Township of Middlefield (Otsego County, NY) Jennifer Huntington against the township seeking to overturn Middlefield's recent ban on gas drilling. Huntington claims it violates New York State law which reserves the right to regulate oil and gas drilling in the state.
A case heard by the Fifth District Court of Appeals in Ohio in which a landowner claimed that the relatively little drilling done on a small portion of their land should allow them to reclaim title to the mineral rights and release the unused portions of the land to another driller. The court disagreed, ruling the language in the lease does not allow it.
On The Rocks Presentation - Royalty Calculations: Deducting Post-Production C...Burleson LLP
Download slides on Royalty Calculations: Deducting Post-Production Costs," presented by Senior Associate, Matthew Lichtenauer in June 2015.
For questions, please contact Matthew Lichtenauer at mlichtenauer@burlesonllp.com.
WEST SHELL, JR.; and ANDREW C. HAUCK, III, Plaintiffs-Appellants.docxphilipnelson29183
WEST SHELL, JR.; and ANDREW C. HAUCK, III, Plaintiffs-Appellants, HERBERT A. MIDDENDORFF, Plaintiff, v. R.W. STURGE, LTD.; THE COUNCIL OF LLOYD'S; THE SOCIETY OF LLOYD'S; and THE CORPORATION OF LLOYD'S, Defendants-Appellees.
No. 94-3119
UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT
55 F.3d 1227; 1995 U.S. App. LEXIS 13911; 1995 FED App. 0176P;
63 USLW 2804; Blue Sky L. Rep. P 74,044 (6th Cir.)
May 1, 1995, Argued
June 8, 1995, Decided
June 8, 1995, Filed
PRIOR HISTORY: [**1] ON APPEAL from the United States District Court for the Southern District of Ohio. District No. 93-00802. Herman J. Weber, District Judge.
COUNSEL: For WEST SHELL, JR., ANDREW C. HAUCK, III, Plaintiffs - Appellants: John L. Campbell, ARGUED, BRIEFED, Kohnen, Patton & Hunt, Cincinnati, OH. Virginia C. Whitman, White, Getgey & Meyer, Cincinnati, OH. For R.W. STURGE, LTD., formerly A.L. Sturge (Management) LTD dba R.W. Sturge & Company, THE CORPORATION OF LLOYD'S, THE SOCIETY OF LLOYD’s THE COUNCIL OF LLOYD'S, Defendants - Appellees: Charles J. Faruki, ARGUED, BRIEFED, Faruki, Gilliam & Ireland, Dayton, OH.
JUDGES: Before: KENNEDY and SUHRHEINRICH, Circuit Judges; HILLMAN, District Judge. * * The Honorable Douglas W. Hillman, United States District Judge for the Western District of Michigan, sitting by designation.
OPINIONBY: KENNEDY
OPINION: [***2]
[*1228] KENNEDY, Circuit Judge. Plaintiffs, investors in the Society of Lloyd's, brought this diversity action against defendants R. W. Sturge, Ltd., the Society of Lloyd’s, the Council of Lloyd’s and the Corporation of Lloyd’s seeking to rescind their investment contracts under Ohio securities law. Defendants filed a motion to dismiss for improper venue under Rule 12(b)(3) of the Federal Rules of Civil Procedure on the grounds that forum selection clauses in the investment contracts gave exclusive jurisdiction to the English courts. The District Court granted the motion to dismiss and plaintiffs now appeal, arguing that the forum selection clauses deprive them of their substantive rights under the Ohio securities laws and that Ohio public policy outweighs the policies served by enforcing the forum selection clauses. For the following reasons, we affirm.
I.
The Society [**2] of Lloyd's, or Lloyd’s of London, (“Lloyd's”) is not an insurance company, but rather is an insurance marketplace in which individual Underwriting Members, or Names, join together in syndicates to underwrite a particular type of business. The Corporation of Lloyd’s (“Corporation”), which was created by an Act of Parliament, regulates the Lloyd’s insurance market. The Corporation itself does not underwrite any insurance, but provides facilities and services to assist underwriters. The Corporation is managed by the Council of Lloyd’s (“Council”) which controls the admission and discipline of Names, sets the Names’ reserve requirements and establishes standards for Lloyd’s policies.
To become a Name, one must apply and be sponsore.
Anderson energy Corporation v. Dominion Oklahoma Texas Exploration & Production, Inc., et al., No. 04-14-00170-CV, In the Fourth Court of Appeals, San Antonio, Texas
NY Court of Appeals Decision in Walter R Beardslee v Inflection EnergyMarcellus Drilling News
The decision in a case before New York's highest court, the Court of Appeals, that finds the concept of force majeure does not grant energy companies the right to extend oil and gas leases beyond the initial term even if a state government moratorium or ban is placed on shale drilling. In essence, it guts the force majeure clause in state contracts, rendering such a clause useless and screwing contract law in New York State. A very poor decision.
OH Court Decision Striking Down Municipal Home Rule for Oil & Gas DrillingMarcellus Drilling News
The court decision from the Ohio Ninth Appeallate District Court in the case of Munroe Falls v Beck Energy in which the appeallate court says that local zoning regulations are preempted by the state's regulations when it comes to oil and gas drilling. Municipalities cannot prevent drilling based on their own zoning regulations. Certain local zoning laws still apply (road use, rights-of-way, etc.). This decision has major implications for Utica Shale drillers and for local municipalities.
Overview of current trends in oil and gas royalty litigation. Covers post-production cost deductions, royalty calculation, lease royalty clauses, and some applicable statutory provisions.
PA Superior Court Ruling in Patricia Wright v. Misty Mountain, LLC and Shirle...Marcellus Drilling News
A ruling in an important mineral rights case in Pennsylvania, stemming from the sale of land, but not the oil and gas mineral rights, in 1950 in Bradford County, PA. The court upheld a decision that that the original mineral rights holder retained those rights even after a lease for those rights had expired.
Quarterly legislative action update: Marcellus and Utica shale region (4Q16)Marcellus Drilling News
A quarterly update from the legal beagles at global law firm Norton Rose Fulbright. A quarterly legislative action update for the second quarter of 2016 looking at previously laws acted upon, and new laws introduced, affecting the oil and gas industry in Pennsylvania, Ohio and West Virginia.
An update from Spectra Energy on their proposed $3 billion project to connect four existing pipeline systems to flow more Marcellus/Utica gas to New England. In short, Spectra has put the project on pause until mid-2017 while it attempts to get new customers signed.
A letter from Rover Pipeline to the Federal Energy Regulatory Commission requesting the agency issue the final certificate that will allow Rover to begin tree-clearing and construction of the 511-mile pipeline through Pennsylvania, West Virginia, Ohio and Michigan. If the certificate is delayed beyond the end of 2016, it will delay the project an extra year due to tree-clearing restrictions (to accommodate federally-protected bats).
DOE Order Granting Elba Island LNG Right to Export to Non-FTA CountriesMarcellus Drilling News
An order issued by the U.S. Dept. of Energy that allows the Elba Island LNG export facility to export LNG to countries with no free trade agreement with the U.S. Countries like Japan and India have no FTA with our country (i.e. friendly countries)--so this is good news indeed. Although the facility would have operated by sending LNG to FTA countries, this order opens the market much wider.
A study released in December 2016 by the London School of Economics, titled "On the Comparative Advantage of U.S. Manufacturing: Evidence from the Shale Gas Revolution." While America has enough shale gas to export plenty of it, exporting it is not as economic as exporting oil due to the elaborate processes to liquefy and regassify natural gas--therefore a lot of the gas stays right here at home, making the U.S. one of (if not the) cheapest places on the planet to establish manufacturing plants, especially for manufacturers that use natural gas and NGLs (natural gas liquids). Therefore, manufacturing, especially in the petrochemical sector, is ramping back up in the U.S. For every two jobs created by fracking, another one job is created in the manufacturing sector.
Letter From 24 States Asking Trump & Congress to Withdraw the Unlawful Clean ...Marcellus Drilling News
A letter from the attorneys general from 24 of the states opposed to the Obama Clean Power Plan to President-Elect Trump, RINO Senate Majority Leader Mitch McConnel and RINO House Speaker Paul Ryan. The letter asks Trump to dump the CPP on Day One when he takes office, and asks Congress to adopt legislation to prevent the EPA from such an egregious overreach ever again.
Report: New U.S. Power Costs: by County, with Environmental ExternalitiesMarcellus Drilling News
Natural gas and wind are the lowest-cost technology options for new electricity generation across much of the U.S. when cost, public health impacts and environmental effects are considered. So says this new research paper released by The University of Texas at Austin. Researchers assessed multiple generation technologies including coal, natural gas, solar, wind and nuclear. Their findings are depicted in a series of maps illustrating the cost of each generation technology on a county-by-county basis throughout the U.S.
Annual report issued by the U.S. Energy Information Administration showing oil and natural gas proved reserves, in this case for 2015. These reports are issued almost a year after the period for which they report. This report shows proved reserves for natural gas dropped by 64.5 trillion cubic feet (Tcf), or 16.6%. U.S. crude oil and lease condensate proved reserves also decreased--from 39.9 billion barrels to 35.2 billion barrels (down 11.8%) in 2015. Proved reserves are calculated on a number of factors, including price.
The monthly tabulation and prediction from the U.S. Energy Information Administration on production and activity in the largest 7 U.S. shale plays. All 7 shale plays will experience a decrease in natural gas production from the previous month due to low commodity prices.
Velocys is the manufacturer of gas-to-liquids (GTL) plants that convert natural gas (a hyrdocarbon) into other hydrocarbons, like diesel fuel, gasoline, and even waxes. This PowerPoint presentation lays out the Velocys plan to get the company growing. GTL plants have not (so far) taken off in the U.S. Velocys hopes to change that. They specialize in small GTL plants.
PA DEP Revised Permit for Natural Gas Compression Stations, Processing Plants...Marcellus Drilling News
In January 2016, Gov. Wolf announced the DEP would revise its current general permit (GP-5) to update the permitting requirements for sources at natural gas compression, processing, and transmission facilities. This is the revised GP-5.
PA DEP Permit for Unconventional NatGas Well Site Operations and Remote Piggi...Marcellus Drilling News
In January 2016, PA Gov. Wolf announced the Dept. of Environmental Protection would develop a general permit for sources at new or modified unconventional well sites and remote pigging stations (GP-5A). This is the proposed permit.
Onerous new regulations for the Pennsylvania Marcellus Shale industry proposed by the state Dept. of Environmental Protection. The new regs will, according to the DEP, help PA reduce so-called fugitive methane emissions and some types of air pollution (VOCs). This is liberal Gov. Tom Wolf's way of addressing mythical man-made global warming.
A sort of "year in review" for the gas industry in the northeast. If you could boil it all down, the word that appears prominently throughout is "delay" with respect to important natgas pipeline projects. From the Constitution, which should have already been built by now, to smaller projects, delays were the prominent trend for 2016.
The Pennsylvania Public Utility Commission responded to each point raised in a draft copy of the PA Auditor General's audit of how Act 13 impact fee money, raised from Marcellus Shale drillers, gets spent by local municipalities. The PUC says it's not their job to monitor how the money gets spent, only in how much is raised and distributed.
Pennsylvania Public Utility Commission Act 13/Impact Fees Audit by PA Auditor...Marcellus Drilling News
A biased look at how 60% of impact fees raised from PA's shale drilling are spent, by the anti-drilling PA Auditor General. He chose to ignore an audit of 40% of the impact fees, which go to Harrisburg and disappear into the black hole of Harrisburg spending. The Auditor General claims, without basis in fact, that up to 24% of the funds are spent on items not allowed under the Act 13 law.
The final report from the Pennsylvania Dept. of Environmental Protection that finds, after several years of testing, no elevated levels of radiation from acid mine drainage coming from the Clyde Mine, flowing into Ten Mile Creek. Radical anti-drillers tried to smear the Marcellus industry with false claims of illegal wastewater dumping into the mine, with further claims of elevated radiation levels in the creek. After years of testing, the DEP found those allegations to be false.
FERC Order Denying Stay of Kinder Morgan's Broad Run Expansion ProjectMarcellus Drilling News
Several anti-drillers filed an appeal of the Federal Energy Regulatory Commission's Certificate for the Kinder Morgan Broad Run Expansion Project, asking for a stay claiming a removal of 40 acres of forest for a compressor station would irreparably harm Mom Earth. FERC has ruled against the stay and told the antis Mom Earth will be just fine.
Final Environmental Impact Statement for NEXUS Gas Transmission ProjectMarcellus Drilling News
The Final Environmental Impact Statement (FEIS) for the NEXUS Pipeline project, a $2 billion, 255-mile interstate pipeline that will run from Ohio through Michigan and eventually to the Dawn Hub in Ontario, Canada. FERC gave the project a thumbs up, which clears the way for a Certificate to be issued in early 2017.
हम आग्रह करते हैं कि जो भी सत्ता में आए, वह संविधान का पालन करे, उसकी रक्षा करे और उसे बनाए रखे।" प्रस्ताव में कुल तीन प्रमुख हस्तक्षेप और उनके तंत्र भी प्रस्तुत किए गए। पहला हस्तक्षेप स्वतंत्र मीडिया को प्रोत्साहित करके, वास्तविकता पर आधारित काउंटर नैरेटिव का निर्माण करके और सत्तारूढ़ सरकार द्वारा नियोजित मनोवैज्ञानिक हेरफेर की रणनीति का मुकाबला करके लोगों द्वारा निर्धारित कथा को बनाए रखना और उस पर कार्यकरना था।
An astonishing, first-of-its-kind, report by the NYT assessing damage in Ukraine. Even if the war ends tomorrow, in many places there will be nothing to go back to.
01062024_First India Newspaper Jaipur.pdfFIRST INDIA
Find Latest India News and Breaking News these days from India on Politics, Business, Entertainment, Technology, Sports, Lifestyle and Coronavirus News in India and the world over that you can't miss. For real time update Visit our social media handle. Read First India NewsPaper in your morning replace. Visit First India.
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‘वोटर्स विल मस्ट प्रीवेल’ (मतदाताओं को जीतना होगा) अभियान द्वारा जारी हेल्पलाइन नंबर, 4 जून को सुबह 7 बजे से दोपहर 12 बजे तक मतगणना प्रक्रिया में कहीं भी किसी भी तरह के उल्लंघन की रिपोर्ट करने के लिए खुला रहेगा।
31052024_First India Newspaper Jaipur.pdfFIRST INDIA
Find Latest India News and Breaking News these days from India on Politics, Business, Entertainment, Technology, Sports, Lifestyle and Coronavirus News in India and the world over that you can't miss. For real time update Visit our social media handle. Read First India NewsPaper in your morning replace. Visit First India.
CLICK:- https://firstindia.co.in/
#First_India_NewsPaper
03062024_First India Newspaper Jaipur.pdfFIRST INDIA
Find Latest India News and Breaking News these days from India on Politics, Business, Entertainment, Technology, Sports, Lifestyle and Coronavirus News in India and the world over that you can't miss. For real time update Visit our social media handle. Read First India NewsPaper in your morning replace. Visit First India.
CLICK:- https://firstindia.co.in/
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In a May 9, 2024 paper, Juri Opitz from the University of Zurich, along with Shira Wein and Nathan Schneider form Georgetown University, discussed the importance of linguistic expertise in natural language processing (NLP) in an era dominated by large language models (LLMs).
The authors explained that while machine translation (MT) previously relied heavily on linguists, the landscape has shifted. “Linguistics is no longer front and center in the way we build NLP systems,” they said. With the emergence of LLMs, which can generate fluent text without the need for specialized modules to handle grammar or semantic coherence, the need for linguistic expertise in NLP is being questioned.
Do Linguistics Still Matter in the Age of Large Language Models.pptx
Ohio Supreme Court Decision: Lutz v. Chesapeake Appalachia
1. [Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as Lutz
v. Chesapeake Appalachia, L.L.C., Slip Opinion No. 2016-Ohio-7549.]
NOTICE
This slip opinion is subject to formal revision before it is published in an
advance sheet of the Ohio Official Reports. Readers are requested to
promptly notify the Reporter of Decisions, Supreme Court of Ohio, 65
South Front Street, Columbus, Ohio 43215, of any typographical or other
formal errors in the opinion, in order that corrections may be made before
the opinion is published.
SLIP OPINION NO. 2016-OHIO-7549
LUTZ ET AL. v. CHESAPEAKE APPALACHIA, L.L.C.
[Until this opinion appears in the Ohio Official Reports advance sheets, it
may be cited as Lutz v. Chesapeake Appalachia, L.L.C., Slip Opinion No.
2016-Ohio-7549.]
Certified question of state law—Cause dismissed.
(No. 2015-0545—Submitted January 5, 2016—Decided November 2, 2016.)
ON ORDER from the United States District Court for the Northern District of Ohio,
Eastern Division, Certifying a Question of State Law, No. 4:09-cv-2256.
__________________
KENNEDY, J.
I. Introduction
{¶ 1} The United States District Court for the Northern District of Ohio,
Eastern Division, has certified the following question to this court pursuant to
S.Ct.Prac.R. 9.01: “Does Ohio follow the ‘at the well’ rule (which permits the
deduction of post-production costs) or does it follow some version of the
2. SUPREME COURT OF OHIO
2
‘marketable product’ rule (which limits the deduction of post-production costs
under certain circumstances)?”
{¶ 2} Under Ohio law, an oil and gas lease is a contract that is subject to the
traditional rules of contract construction. Because the rights and remedies of the
parties are controlled by the specific language of their lease agreement, we decline
to answer the question of law submitted by the United States District Court for the
Northern District of Ohio, Eastern Division and dismiss the cause.
II. Facts and Procedural History
{¶ 3} The action in the federal court is a putative class action in which
respondents here, Regis and Marion Lutz, Leonard Yochman, Joseph Yochman,
and C.Y.Y., L.L.C., the landowner-lessors, claim that petitioner, Chesapeake
Appalachia, L.L.C., the lessee, underpaid gas royalties under the terms of their
leases. The leases in this case were signed in 1970 and 1971. Both petitioner and
respondents agree that by the early 1990s, deregulation had significantly changed
the natural-gas market.
{¶ 4} It is undisputed that under each lease, the lessee must bear all the
production costs, i.e., the costs of producing the gas from below the ground and
bringing it to the wellhead. The dispute centers on postproduction costs, i.e., the
costs incurred after the gas is produced at the wellhead and before it is sold. Those
postproduction costs may include, among other costs, the cost of gathering the gas
3. January Term, 2016
3
from various wells, the cost to process and compress the gas, and the cost of
transporting the gas to the point of sale.
{¶ 5} In its certification order to this court, the federal court set out the
royalty clauses found in the leases:
[1] The royalties to be paid by Lessee are * * * (b) on gas, including
casinghead gas or other gaseous substance, produced and sold or
used off the premises or for the extraction of gasoline or other
product therefrom, the market value at the well of one-eighth of the
gas so sold or used, provided that on gas sold at the wells the royalty
shall be one-eighth of the amount realized from such sale.
[2] Lessee [sic, Lessor] to receive the field market price per
thousand cubic feet for one-eighth (1/8) of all gas marketed from the
premises.
[3] Lessee covenants and agreed to deliver to the credit of the
Lessor, as royalty, free of cost, in the pipeline to which the wells
drilled by the Lessee may be connected the equal one-eighth part of
all Oil and/or Gas produced and saved from said leased premises.
{¶ 6} At issue is whether the lessee is permitted to deduct postproduction
costs from the lessors’ royalties, and, if so, how those costs are to be calculated.
{¶ 7} The lessors assert that under the language of the leases, which
specifies that royalties are to be paid based on “market value at the well” or the
“field market price,” postproduction costs should not be deducted from the sale
price before the royalty payments are calculated. The lessors argue that because
4. SUPREME COURT OF OHIO
4
there is no market at the well, the lessee has an implied duty to market the product
once it is severed from the wellhead, and the lessee must bear the cost of bringing
the product to the market.
{¶ 8} The lessee asserts that the plain language of a lease controls and that
when a lease specifies that the owner’s royalty is based on the value of the product
at the well, any postproduction costs must be deducted from the sale price to arrive
at the well price before the agreed-upon royalty can be calculated. The lessee also
disputes the factual veracity and relevance of the lessors’ contention that there is
no market at the well. The lessee argues that regardless of where the gas is sold,
the lease language provides for royalty payments based on the value of gas at the
well.
III. Law and Analysis
{¶ 9} In Ohio, oil and gas leases are contracts. Harris v. Ohio Oil Co., 57
Ohio St. 118, 129, 48 N.E. 502 (1897). “The rights and remedies of the parties to
an oil or gas lease must be determined by the terms of the written instrument
* * *.” Id. Accord Chesapeake Exploration, L.L.C. v. Buell, 144 Ohio St.3d 490,
2015-Ohio-4551, 45 N.E.3d 185, ¶ 53. It is a well-known and established principle
of contract interpretation that “[c]ontracts are to be interpreted so as to carry out the
intent of the parties, as that intent is evidenced by the contractual language.”
Skivolocki v. E. Ohio Gas Co., 38 Ohio St.2d 244, 313 N.E.2d 374 (1974),
paragraph one of the syllabus. “Extrinsic evidence is admissible to ascertain the
5. January Term, 2016
5
intent of the parties when the contract is unclear or ambiguous, or when
circumstances surrounding the agreement give the plain language special
meaning.” Graham v. Drydock Coal Co., 76 Ohio St.3d 311, 313-314, 667 N.E.2d
949 (1996). This is particularly true “when circumstances surrounding an
agreement invest the language of the contract with a special meaning, [because]
extrinsic evidence can be considered in an effort to give effect to the parties’
intention.” Martin Marietta Magnesia Specialties, L.L.C. v. Pub. Util. Comm., 129
Ohio St.3d 485, 2011-Ohio-4189, 954 N.E.2d 104, ¶ 29. Extrinsic evidence can
include “(1) the circumstances surrounding the parties at the time the contract was
made, (2) the objectives the parties intended to accomplish by entering into the
contract, and (3) any acts by the parties that demonstrate the construction they gave
to their agreement.” United States Fid. & Guar. Co. v. St. Elizabeth Med. Ctr., 129
Ohio App.3d 45, 56, 716 N.E.2d 1201 (2nd Dist.1998).
{¶ 10} The certified question asks us to declare, based on the language of
the three different royalty clauses in the five leases before us, whether Ohio law
imposes the “at-the-well” rule or the “marketable product” rule. The leases at issue
were negotiated and signed prior to the culmination of deregulation of the natural
gas marketplace by the Federal Energy Regulatory Commission in 1992. See
Pipeline Serviced Obligations and Revisions to Regulations Governing Self-
Implementing Transportation under Part 284 of the Commission’s Regulations, 57
Fed.Reg. 13,267-02 (1992). The contractual relationship between the lessor and
6. SUPREME COURT OF OHIO
6
the lessee spans more than four decades. If the language of the leases is ambiguous,
we cannot give effect to the parties’ intent, because we do not have extrinsic
evidence. If the language of the leases is not ambiguous, then the federal court
should be able to interpret the leases without our assistance.
IV. Conclusion
{¶ 11} Under Ohio law, an oil and gas lease is a contract that is subject to
the traditional rules of contract construction. Because the rights and remedies of
the parties are controlled by the specific language of their lease agreement, we
decline to answer the certified question and dismiss this cause.
Cause dismissed.
O’CONNOR, C.J., and O’DONNELL, LANZINGER, and FRENCH, JJ., concur.
PFEIFER, J., dissents, with an opinion.
O’NEILL, J., dissents, with an opinion.
_________________
PFEIFER, J., dissenting.
{¶ 12} We have been asked whether Ohio follows the “at the well” rule
(which permits the deduction of postproduction costs) or the “marketable product”
rule (which limits the deduction of postproduction costs under certain
circumstances) in the calculation of royalties under an oil and gas lease. I would
answer the question certified by the federal court, and I would state that Ohio
follows the marketable-product rule.
7. January Term, 2016
7
{¶ 13} The marketable-product rule appropriately gives lessors the benefit
of the bargain they sought in the leases at issue here—one eighth of the value of the
material pulled from the land. Three significant factors influence my answer: the
complete control that lessees have over postproduction costs, the ease with which
these costs could be manipulated, and the fact that, in most instances, the lessee
drafts the lease document.
{¶ 14} Because there is no longer a market at the wellhead, the amount due
a lessor should be based on the price at the first discernible market downstream.
Adopting this rule would, of course, result in all future leases being more finely
crafted to incorporate postproduction costs—all the better. In the meantime, lessors
would not be forced to pay for a share of postproduction costs unless specifically
required to do so by the lease.
{¶ 15} I would adopt the marketable-product rule. I dissent.
_________________
O’NEILL, J., dissenting.
{¶ 16} The United States District Court for the Northern District of Ohio,
Eastern Division, has certified the following question to this court: “Does Ohio
follow the ‘at the well’ rule (which permits the deduction of post-production costs)
or does it follow some version of the ‘marketable product’ rule (which limits the
deduction of post-production costs under certain circumstances)?” On June 03,
2015, this court agreed to answer the question. 142 Ohio St.3d 1474, 2015-Ohio-
8. SUPREME COURT OF OHIO
8
2104, 31 N.E.3d 653. I disagree with the majority’s decision to decertify the
question. In response to the federal court’s question, I would hold that in Ohio, the
“rights and remedies of the parties to an oil or gas lease must be determined by the
terms of the written instrument.” Chesapeake Exploration, L.L.C. v. Buell, 144
Ohio St.3d 490, 2015-Ohio-4551, 45 N.E.3d 185, ¶ 53. Where a lease provides that
the lessor’s royalty is based on value at the well, Ohio follows the “at the well” rule.
I would further hold that “at-the-well,” under Ohio law, is defined as the gross
proceeds of a sale minus postproduction costs.
{¶ 17} The at-the-well rule is premised on the understanding that
production is complete, for purposes of calculating royalties, when the lessee
captures the product and it is held at the wellhead. 3A Saint-Paul, Summers Oil
and Gas, Section 33.2, at 141 (3d Ed.2008); see also Piney Woods Country Life
School v. Shell Oil Co., 726 F.2d 225, 242 (5th Cir.1984) (“market value at the
well” means market value before processing and transportation). Thus, in
jurisdictions following the at-the-well rule, “at the well” lease language refers to
the location as well as the quality of the gas for calculating a royalty, regardless of
where the lessee sells the gas. Piney Woods Country Life School at 231; Schroeder
v. Terra Energy, Ltd., 223 Mich.App. 176, 187, 565 N.W.2d 887 (1997) (“ ‘At the
well’ refers to proceeds minus refining and transportation costs, as opposed to
proceeds at the point of sale, where refining and transportation costs are not
deducted”); Poplar Creek Dev. Co. v. Chesapeake Appalachia, L.L.C., 636 F.3d
9. January Term, 2016
9
235, 244 (6th Cir.2011) (“at the well” refers to gas in its natural and unprocessed
state, and a lessee is entitled to deduct the costs of processing and transportation
from the lessor’s royalty payment); Sternberger v. Marathon Oil Co., 257 Kan. 315,
322, 894 P.2d 788 (1995) (“The lease’s silence on the issue of postproduction
deductions does not make the lease ambiguous. The lease clearly specifies that
royalties are to be paid based on ‘market price at the well’ ”).
{¶ 18} Conversely, under the marketable-product rule, production is not
considered complete until the lessee has made the product marketable. 3A Saint-
Paul, Section 33.3, at 146-147. The legal principle here is that in addition to the
express terms of the lease, there are covenants or duties that are attendant to all oil
and gas leases, one of which is the lessee’s implied covenant to market the product.
See 2 Brown, Brown & Gillaspia, The Law of Oil and Gas Leases, Section 16.01
and 16.02, at 16-5 to 16-7 (2d Ed.2016). The duty on the lessee to make the product
marketable does not arise from the express terms of the lease but from the implied
covenant to market the product. Wellman v. Energy Res., Inc., 210 W.Va. 200, 210,
557 S.E. 2d 254 (2001).
{¶ 19} My view is that application of the marketable-product rule runs the
risk of giving the lessor the benefit of a bargain not made. As a Michigan appellate
court has observed, interpreting at-the-well language to refer to gross proceeds at
the market requires the lessee to pay royalties
10. SUPREME COURT OF OHIO
10
not only on the value of the gas at the wellhead, but also upon the
costs that [the lessee] has incurred to prepare the gas for, and
transport the gas to, market. Thus [the lessors’] royalties would be
increased merely as a function of [the lessee’s] own efforts to
enhance the value of the gas through postproduction investments
that it has exclusively underwritten.
Schroeder at 189.
{¶ 20} Although this court has not directly addressed whether an implied
covenant to market applies to oil and gas leases, this court has addressed the
imposition of an implied covenant of reasonable development. State ex rel.
Claugus Family Farm, L.P. v. Seventh Dist. Court of Appeals, 145 Ohio St.3d 180,
2016-Ohio-178, 47 N.E.3d 836, ¶ 31-33. We concluded that an implied covenant
of reasonable development arises only when the lease is silent on the subject. Id.
at ¶ 31, citing Harris v. Ohio Oil Co., 57 Ohio St. 118, 128, 48 N.E. 502 (1807). In
Claugus, the lease included a provision requiring development to commence within
ten years and specific language disclaiming the use of implied covenants. Id. at
¶ 32. Accordingly, this court declined to impose an implied covenant to develop
the land. Id. See also Kachelmacher v. Laird, 92 Ohio St. 324, 110 N.E. 933
(1915), paragraph one of the syllabus (“There can be no implied covenants in a
contract in relation to any matter that is covered by the written terms of the contract
itself”). When a contract specifies an agreed point at which royalties are valued,
implied duties should not be applied to alter that agreement.
11. January Term, 2016
11
{¶ 21} Naturally, as the multiple lease provisions presented in this case
demonstrate, the language of leases may differ, and the law applicable to one form
of lease may not be applicable to another form of lease. Harris at 129. That fact
notwithstanding, I would answer the question posed by the federal court. Pursuant
to existing Ohio law, the parties’ rights and remedies must be determined by the
terms of the lease. Chesapeake Exploration, L.L.C., 144 Ohio St.3d 490, 2015-
Ohio-4551, 45 N.E.3d 185, ¶ 53. When a lease provides that the lessor’s royalty is
based on value at the well, Ohio follows the at-the-well rule. I would further hold
that “at the well,” under Ohio law, is defined as the gross proceeds of a sale minus
postproduction costs.
{¶ 22} I respectfully dissent.
_________________
Kirkland & Ellis L.L.P. and Daniel T. Donovan; Vorys, Sater, Seymour &
Pease, L.L.P., and John K. Keller; and Reed Smith, L.L.P., Kevin C. Abbott, and
Nicolle R. Snyder Bagnell, for petitioner.
Lowe, Eklund, & Wakefield Co., L.P.A., and James A. Lowe; Law Office
of Robert C. Sanders and Robert Sanders, for respondents.
Lija Kaleps-Clark, in support of petitioner for amici curiae Ohio Oil and
Gas Association, Artex Oil Company, Eclipse Resources I, L.P., Enervest
Operating, L.L.C., NGO Development Corporation, Inc., Rex Energy Corporation,
and Sierra Resources, L.L.C.
Porter, Wright, Morris & Arthur, L.L.P., L. Bradford Hughes, and
Christopher J. Baronzzi; and Matthew A. Haynie, in support of petitioner for
amicus curiae American Petroleum Institute.
12. SUPREME COURT OF OHIO
12
McGinnis, Lochridge & Kilgore and Bruce M. Kramer, in support of
petitioner for amicus curiae Bruce M. Kramer.
Krugliak, Wilkins, Griffiths & Dougherty Co., L.P.A., William J. Williams,
Scott M. Zunakowski, Gregory W. Watts, and Aletha M. Carver, in support of
neither side for amici curiae Sam Johnson, Zehentbauer Family Land, L.P.,
Hanover Farms, L.P., and Bounty Minerals, L.L.C.
_________________