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Ohio Supreme Court hears oil, gas rights case

Two Marietta law firms are awaiting a ruling from the Ohio Supreme Court after arguing in Columbus this week a question of natural gas leasing and landowner rights.

“It’s rare for a case to make it all the way to the (Ohio Supreme Court) anyway, but that two area firms are arguing on opposing sides there, the last time that happened was maybe 17 years ago in a personal injury case,” said Ethan Vessels of Fields, Dehmlow and Vessels on Wednesday.

Vessels represents Patricia Schultheiss, who owns 48 acres of land in Warren Township. In 2014, Schultheiss filed a lawsuit in Washington County Common Pleas Court to terminate the lease on her property’s mineral rights to Heinrich Enterprises, Inc. et al, claiming that because there had been no profitable production of the natural gas well on her property between 1977 and 1981, the terms of the lease were completed.

“Lots of these kinds of lawsuits have been filed in Washington, Monroe and Noble counties,” said Vessels. “The purpose is to clean up the title for your property so that you could be clear to lease to another party in the future. It’s not a suit for damages or any money, simply to clear the title.”

Representing Heinrich Enterprises, Inc. et al are James Huggins and Dan Corcoran of Theisen and Brock. They argued Tuesday in front of the supreme court that because Schultheiss continued to receive free natural gas to her home not only between 1977 and 1981 but also to this day, that the lease was not terminated by lack of outside sales.

“Right now we have more than one case on hold that could be impacted by this case,”said Corcoran on Wednesday. “This type of lawsuit isn’t new, what we’re asking the (Ohio Supreme Court) to do in this case is tell us what the law says and how it is applied to these old wells and the many small oil and gas businesses that could be impacted by its decision.”

The court has several options available to them at this time: to determine that the case was improvidently accepted and make no decision (essentially upholding the 4th District of Appeals decision without a written determination of its own), to affirm the appellate court’s decision that the lease was indeed terminated or to rule in favor of Heinrich in either a broad or narrow scope with possible additional consideration of a statute of limitations.

Justice Judith French asked Corcoran Tuesday if he had raised the estoppel argument– an inconsistency in behavior on the part of Schultheiss continuing to accept free natural gas in lieu of royalty– in the lower courts before Heinrich’s appeal was accepted to the court.

Corcoran said that while the term itself was not used in the lower courts, the legal principle was.

“What we said, your honor, was that the lease was continued because of what she had received under the lease agreement,” argued Corcoran Tuesday. “It would be inconsistent to say that the lease isn’t in effect at the same time she was receiving those benefits … (and) acquiescing in the continued operation of the lease for more than 30 years by our clients.”

Corcoran said Wednesday that had the suit to terminate the lease been filed closer to the time frame when the well was not actively producing commercial gas, then the case would be different.

“We’re hoping that (the court) says that it does matter what the behavior is over 30 years,” he said.

Vessels’ argument is directly in opposition to the assumption that acceptance of free gas continued the lease.

“The appellate court said the lease had terminated under its own terms and that nothing she did after that had any bearing,” said Vessels Wednesday. “And we don’t know if (Heinrich) ever provided continued maintenance on the well in question after 1981, the gas Ms. Schultheiss was receiving to heat her home could have been coming up without that maintenance.”

Vessels said the court could take anywhere from one to six months to decide on the case.

At a glance

Issues to be determined by the Ohio Supreme Court in Patricia J. Schultheiss v. Heinrich Enterprises Inc. et al.:

¯ Should the doctrine of “estoppel” prevent a landowner from terminating an oil and gas lease if the owner accepts benefits from the driller, such as free gas to the home?

¯ Does a prolonged, but temporary, production stoppage of an oil and gas well during the secondary term of an oil and gas lease automatically terminate a lease?

¯ Should Ohio’s general statute of limitations prevent any claim from being filed based on an incident that happened more than 21 years before the filing of the lawsuit?

What’s next

¯ Heinrich Enterprises, Inc. et al. and Patricia Schultheiss and their respective attorneys will await a decision expected in the next one to six months.

Source: Ohio Supreme Court.

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