In a decision interpreting the force majeure clause of an oil and gas lease, the Seventh District Court of Appeals of Ohio in Haverhill Glen, LLC v. Eric Petroleum Corporation, Slip Opinion No. 2016-Ohio-8030, ruled that the refusal of the surface owner to grant access for drilling or other operations to the lessee of a severed mineral estate is sufficient to trigger a broadly worded force majeure clause in an oil and gas lease, thus tolling the primary term of the lease.
In Haverhill, Appellee Eric Petroleum Corporation leased the severed mineral estate owned by Appellant Haverhill Glen, LLC. The surface estate was owned by New Rocky Valley Farms, Inc. The oil and gas lease in question contained a force majeure clause that stated “[w]hen drilling, reworking, production or other operations are prevented or delayed by . . . inability to obtain necessary . . . access or easements, . . . or by any other cause not reasonably within Lessee’s control, this lease shall not terminate because of such prevention or delay, and shall be maintained in force and effect for so long as prevention or delay continues. . . .”
As a result of New Rocky preventing Eric Petroleum from entering upon the land on several occasions, no well was established during the primary term of the lease. However, prior to its expiration, Eric Petroleum notified Haverhill that it was invoking the force majeure clause to toll the primary term of the lease. Haverhill subsequently sought a declaration that “the parties’ Lease had expired due to non-production during the primary term.” The trial court ruled that the denial of access to the property by the surface owner was sufficient to invoke the force majeure clause of the lease.
On appeal, the Seventh District Court of Appeals reviewed the arguments and affirmed the trial court’s decision. In its holding, the Seventh District noted that “the force majeure clause . . . is broadly written.” In affirming the trial court, the Court of Appeals endorsed the holding that Eric Petroleum “had the right to [drill] on the acreage that provided them with the best opportunity to succeed in their venture” and the right to rely upon the negotiated language of the force majeure clause. Further, the Court of Appeals noted that under the lease, the dispute of ownership of mineral interests by the surface owner by itself was sufficient to trigger the force majeure clause.
This decision is notable because it held that: 1. a broadly worded force majeure clause is invoked by the denial of access by the surface owner; and 2: the dispute of mineral rights by the surface owner is sufficient to constitute denial of access. Consequently, when claiming a lease has expired due to non-production during the primary term, mineral lease holders and mineral estate owners must carefully examine the force majeure clause in their mineral lease to determine whether conditions have been met to trigger the tolling of the primary term.
If you would like a copy of the Haverhill decision or have any questions with respect to oil, gas, or any other energy related issue, please contact a member of the Oil, Natural Gas and Energy Practice Group.
This has been prepared for informational purposes only. It does not contain legal advice or legal opinion and should not be relied upon for individual situations. Nothing herein creates an attorney-client relationship between the Reader and Reminger. The information in this document is subject to change and the Reader should not rely on the statements in this document without first consulting legal counsel.
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