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Wednesday, October 1, 2014

Hess Scores Partial Court Victory in Belmont County Case

From Bricker & Eckler:
The United States District Court for the Southern District of Ohio recently issued two companion decisions in Curtis v. Hess Ohio Resources, LLC, 2014 U.S. Dist. LEXIS 119584 (S.D. Ohio 2014), and DeRosa v. Hess Ohio Resources, LLC, 2014 U.S. Dist. LEXIS 119587 (S.D. Ohio 2014). On one hand, the court agreed with the producer, Hess Ohio Resources (“Hess Ohio”), that the oil and gas leases at issue were extended under two provisions: (i) the drilling-operations clauses; and (ii) the shut-in provisions. On the other hand, the court held that Hess Ohio violated the implied covenant to develop certain non-pooled acreage, and ordered that such acreage be released from the underlying oil and gas lease. 
Both cases arose in Belmont County and centered on two groups of landowners who signed identical five-year oil and gas leases in 2006. The primary issue was whether the actions of the current lessee (Hess Ohio) and/or prior lessee (Marquette Exploration (“Marquette”)) properly extended the oil and gas leases beyond their primary term. Specifically, the court analyzed whether: (i) the preparation of the well pad, spudding of the well, and completion of at least partial fracturing operations constituted being “engaged in drilling or reworking operations”; and (ii) whether the subsequent shutting in of the well from June 2011 through the present was reasonable.
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