Kramer v. PAC Drilling Oil & Gas, L.L.C.
197 Ohio App. 3d 554
| Ohio Ct. App. | 2011Background
- Kramer bought 14 acres of the Kocsis property, which is part of a 149-acre tract with an oil and gas lease held by the Caldwells.
- The lease originally granted the Kocsises free gas for domestic use and later was amended to allow 250,000 cubic feet per year for the farmhouse, plus unlimited free gas to the Kocsis family members at their residence.
- Disruptions in gas flow led the Kramers to run a direct line to a wellhead; PAC responded by shutting in the well and surrendering the lease as to the 14 acres.
- The Kramers sued for declaratory relief on free gas rights and royalties, plus other contract-based and property claims; PAC and Caldwells moved for summary judgment, which the trial court granted.
- The court held that the free-gas covenant runs with the surface estate and is not terminated by PAC’s partial surrender of the oil and gas estates for the 14 acres; the matter was reversed and remanded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does PAC’s partial surrender terminate the Kramers’ free gas right? | Kramers: free gas runs with surface; surrender of oil/gas rights for 14 acres cannot terminate it. | PAC/Cal dwells: surrender ends payments/liabilities; termination may extend to free gas. | No; surrender does not terminate free gas; covenant runs with surface. |
| Does the free-gas covenant run with the surface estate? | Kramer: covenant benefits occupants of farmhouse regardless of ownership. | Caldwells/PAC: rights tied to oil/gas estates. | Yes; covenant runs with the surface estate. |
| What is the effect of the surrender clause on free gas? | Free gas unaffected; clause targets payments/liabilities tied to oil/gas estates. | Surrender terminates some lease obligations, potentially including free gas. | Surrender terminates only oil/gas-estate payments/liabilities, not free gas. |
| Is the Kramers’ claim moot due to other issues? | N/A beyond free gas; seek declaratory relief and royalties. | N/A in brief. | Nonspecific to mootness; decision on free gas controls. |
Key Cases Cited
- Oxford Oil Co. v. Wills, 5th Dist. No. 1999 AP 11 0067, 2000 WL 1901451 (Ohio 2000) (free gas runs with surface unless instrument says otherwise)
- Stapleton v. Columbia Gas Transm. Corp., 2 Ohio App.3d 15, 440 N.E.2d 575 (Ohio 1981) (free-gas clause runs with surface estate)
- Harris v. Ohio Oil Co., 57 Ohio St. 118, 48 N.E. 502 (Ohio 1897) (oil and gas leases are contracts governed by their terms; conveyance of minerals with surface interests)
- Kennecott Corp. v. Union Oil Co., 196 Cal.App.3d 1179, 242 Cal.Rptr. 403 (Cal. App. 1987) (purpose of surrender clause to relieve lessee of duties on surrendered acreage)
- Superior Oil Co. v. Dabney, 147 Tex. 51, 211 S.W.2d 563 (Tex. 1948) (surrender clause as to acreage; effect on free gas)
- Moore v. Indian Camp Coal Co., 75 Ohio St. 493, 80 N.E. 6 (Ohio 1907) (recognizes fee-simple mineral estate determinable upon exhaustion)
- Natural Gas Pipeline Co. of Am. v. Pool, 124 S.W.3d 188, 192 (Tex. 2003) (oil/gas leases are not traditional leases; minerals conveyed subject to possibility of reverter)