HUPP V. BECK ENERGY CORP.: THE FUTURE OF OIL AND NATURAL GAS DEVELOPMENT IN OHIO

Article By: Ben Westbrook

On July 12, 2012, Judge Ed Lane of the Court of Common Pleas for Monroe County, Ohio, raised eyebrows throughout the oil and gas industry when he granted six plaintiffs their motion for summary judgment in the Hupp v. Beck Energy Corp. case. Judge Lane held that the plaintiffs’ mineral leases with Beck Energy Corporation were perpetual leases, and therefore invalid as against public policy. Additionally, on February 8, 2013, Judge Lane upheld a class action lawsuit for over 200 lessors with Beck Energy. The ruling, if affirmed on appeal, has the potential to turn Ohio’s oil and gas industry on its head.

This Article will explore various aspects of the Hupp decision. Part II will begin with an explanation and a recitation of the recent boom of natural gas production in the Marcellus Shale, which is partially located in Ohio. The discussion of the changing circumstances in that area will explain why attorneys should expect a rise in litigation from lessors challenging the validity of the oil and gas leases they signed prior to the boom. Part III will review the history and the use of habendum clauses and delay rentals in mineral leases, discuss how the courts have construed those clauses in the past, and then explain how those clauses establish the length of the lease and the obligations of the lessee. Part IV will provide an overview of Hupp and review the holding. Part V will examine case law on which the Hupp court relied in reaching its holding, as well as case law on which the court should have relied. Part VI will apply the facts in Hupp to the case law discussed in Part V to explain why the appellate court should reverse the holding in Hupp. Part VII will explore the possible fallout if Hupp is not reversed and set forth brief recommendations for landowners, oil and gas producers, and attorneys reviewing their oil and gas leases. Part VIII will conclude this Article with a prediction on how the appellate court will decide the case.

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