Thursday, October 10, 2013

Federal Court Upholds The Enforceability Of Oil And Natural Gas Lease

Lewis Glasser Casey & Rollins PLLC successfully defended Triad Hunter, LLC in another oil and natural gas lease-busting case filed in the U.S. District Court for the Southern District of Ohio.  In Egnot v. Triad Hunter, LLC, Case No. 2:12-CV-1008, the Federal Court held that the lessor’s failure to sign the oil and natural gas lease in the presence of a notary does not invalidate the lease as between the lessor and the lessee.  The Court then held that a husband’s failure to sign over his dower interest in an oil and natural gas lease does not invalidate the lease between the wife, as titled owner, and the oil and natural gas company.  Finally, the Federal Court agreed with other Ohio State and Federal Courts that the lessee’s “Preferential Right to Renew” language in Paragraph 14 of the oil and natural gas lease does not give the lessor the right to invalidate the lease if the oil and natural gas company does not agree to match a third-party bona fide offer.

In addition to upholding the validity of Triad Hunter’s oil and natural gas lease, the Federal Court also made sure Triad Hunter did not lose any of the primary term of the lease while the lawsuit was pending.  The Court held that the running of the primary term of the lease must be tolled, or delayed, during any lawsuit or appeal challenging the validity of the lease.  Such a holding is critical to the oil and natural gas industry as it makes sure a lessor/landowner cannot run out the clock on an oil and natural gas lease by tying up the lease in litigation during the primary term of the lease.  The oil and natural gas company can now have the business security that it will not lose any of the primary term while the lawsuit is pending.