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Wednesday, August 26, 2015

Appeals Court Rules That Ohio Landowners Can't Cancel Lease Due to Nonpayment of Royalties

Tuscarawas County landowners Myron and Nikki Armstrong probably feel like it just makes sense that the oil and gas lease on their property should no longer remain in place.

After all, after purchasing their property in 2003 with an existing lease in place, their land was pooled into a drilling unit and a well was drilled.  Despite that well being drilled, the family has not received a single royalty check.  One would imagine, perhaps, that failure to pay royalties on a well would be very valid grounds to sue for cancellation of a lease.

Two Ohio courts have now ruled that it is not.

First, Armstrongs were defeated in Tuscarawas County Court, and now the Fifth Appellate District has ruled on appeal that because the lease does not specifically state that the lease can be cancelled if the company does not pay the royalties that the lease says it will pay, the lease is still valid.

What does this potentially mean for Ohio landowners?  Jim Willis of Marcellus Drilling News raises the question: “Will this decision embolden Ohio drillers to simply stop paying royalties since the courts won’t cancel leases if they do?”

That seems unlikely, but it still leaves the question of what a landowner should do if they are not being paid royalties as specified in their lease.

View the opinion from the court of appeals below.




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