On January 18, 2023, the Seventh Appellate District Court of Appeals upheld a trial court ruling that language in certain 2013 and 2014 oil and gas leases limiting the leased formations to the “formations commonly known as the Marcellus Shale and the Utica Shale,” did not include the Point Pleasant formation (Terra, L.L.C. v. Rice Drilling D LLC, et al., 2023-Ohio-273). The leases in question also contained language whereby the lessor specifically reserved, inter alia, the oil and gas “in all formations below the base of the Utica Shale.” The facts of the case indicate that the oil and gas operator drilled wells into the Point Pleasant formation under these leases.
At the trial court, the landowner/lessor asserted the geological argument that the Point Pleasant is distinct from the “formation commonly known as the Utica Shale.” The oil and gas companies countered that although the Utica Shale and Point Pleasant are separate rock units, the Point Pleasant is an interval contained within what was “the formation commonly known as the Utica Shale” in 2013 and 2014, when the leases in question were executed. In cross-motions for summary judgment on June 3, 2020 and October 2, 2020, the trial court entered partial summary judgment in favor of the landowner and against the oil and gas companies on claims of trespass and conversion, and on bad faith trespass, respectively. The trial court concluded that the unambiguous language in the 2013 and 2014 leases reserves the right in the Point Pleasant formation to the surface owner.
In a 2-1 decision, the appeals court agreed with the trial court that the “formation commonly known as the Utica Shale” and the reservation of oil and gas “in all formations below the base of the Utica Shale” were unambiguous and that the rights in the Point Pleasant were reserved by the lessor. Because the appeals court found that the lease language is unambiguous, additional evidence as to the meaning of the language of the lease was not considered to determine the meaning of the lease language, such as evidence related to the negotiations by the parties to the leases. Based upon this rationale, the court affirmed summary judgment as to the trespass, conversion and bad faith trespass claims. The appeals court also ruled on evidentiary and compensatory claims that are not discussed in this article, but which are addressed in the opinion, which can be found here.
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Scott K. McKernan
Atencio Hall, PLLC
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Carnegie, PA 15106