2018 Ohio 3250
Ohio Ct. App.2018Background
- Ronald Fuller owned a 94.5-acre tract subject to a 1981 three‑year oil and gas lease to D.B. Shaffer; handwritten lease language limited unitization to "UNITIZATION BY WRITTEN AGREEMENT ONLY!" and provided each well would hold only 40 acres after the primary term.
- A well (Fuller No. 1) drilled in 1981 has continuously produced and continues to hold a 40‑acre unit; the remaining 54.5 acres are no longer held by that lease production.
- In 2009 and later assignments, EnerVest entities and then American Energy‑Utica, LLC (AEU) obtained interests including the deeper (Utica) formation rights; AEU sought to unitize Fuller’s parcel into a large Utica drilling unit without Fuller’s written consent.
- Fuller sued (counterclaim) seeking declaratory relief that the 1981 lease does not cover Utica shale/NGLs and alleging breach for unitization without written agreement; AEU sought summary judgment; lower court ultimately granted summary judgment to AEU on both issues, dismissing Fuller’s claims.
- On appeal this Court affirmed that the 1981 lease grants rights to all formations under the property, but reversed and remanded as to unitization: it held using R.C. §1509.28 to unitize without Fuller’s written agreement breached the handwritten contract provision and retroactively impaired contractual rights.
Issues
| Issue | Plaintiff's Argument (AEU) | Defendant's Argument (Fuller) | Held |
|---|---|---|---|
| Whether AEU breached the lease by unitizing Fuller’s land without his written agreement | R.C. §1509.28 permits agency unitization and that process can bind the lease despite the handwritten restriction | The handwritten clause "UNITIZATION BY WRITTEN AGREEMENT ONLY!" bars unitization without written consent; forcing unitization under R.C. §1509.28 without consent breaches the lease and impairs contract | Court: Breach found. Applying R.C. §1509.28 to unitize without Fuller’s written agreement retroactively impaired the lease obligation; judgment for AEU reversed in part and case remanded to determine remedy. |
| Whether the 1981 lease grants rights to deeper formations (Utica shale) and to products like NGLs | The lease granting clause conveys rights to "oil and gas" without depth limitation, which authorizes exploration/drilling at all depths | The lease was executed with shallow (Clinton) formations in mind and therefore should not reach Utica shale/NGLs | Court: No error in trial court. The plain granting language conveys rights to all formations and products described as "oil and gas;" judgment for AEU on scope affirmed. |
Key Cases Cited
- Harris v. Ohio Oil Co., 57 Ohio St. 118 (contract terms of oil and gas leases govern parties' rights)
- Burtner–Morgan–Stephens Co. v. Wilson, 63 Ohio St.3d 257 (statute cannot be retroactively applied to impair contractual royalty/distribution rights)
- Alexander v. Buckeye Pipe Line Co., 53 Ohio St.2d 241 (terms "oil" and "gas" are construed broadly to include derivative products absent limiting language)
- Smiddy v. The Wedding Party, Inc., 30 Ohio St.3d 35 (appellate standard for reviewing summary judgment)
- Vahila v. Hall, 77 Ohio St.3d 421 (movant's and nonmovant's burdens in summary judgment under Ohio law)