When does an oil and gas lease expire due to lack of production, and how long do landowners have if they want to take recourse in court?
The Ohio Supreme Court ruled on the issue in November 2019, siding with Farm Bureau members Barry and Rosa Browne in Guernsey County.
The case, Browne v. Artex Oil, asked what was the appropriate statute of limitations for the question of whether an oil and gas lease expired due to lack of production. According to Farm Bureau Policy Counsel Leah Curtis, Farm Bureau argued a 21-year statute of limitations was to apply, under court precedent and Ohio law, in support of the Brownes.
The other side argued that it should be a 15-year statute of limitations, which is something that generally applies to a breach of contract case. The Supreme Court ruled, in line with the argument Ohio Farm Bureau made, that there was no breach in this case, rather the Brownes alleged that the lease expired on its own terms. Because there was no breach, the “breach” statute of limitations could not apply and instead the statute of limitations that applies to lawsuits seeking to determine ownership property should apply.
“In general, this is an important decision for landowners and Farm Bureau members,” Curtis said, while noting that while the court was considering a 15-year vs. 21-year statute of limitations, the General Assembly changed the contract statute of limitations and shortened it to eight years and current legislation seeks to shorten this statute of limitations even further.
“Without clarifying the statute of limitations, oil and gas companies would be encouraged to leave unproductive wells on the property, in hopes that within the eight years they would be able to restart production and continue to hold the property,” Curtis said. “It can take some time for a landowner to determine whether they even have a plausible claim worth taking to court. The longer statute of limitations ensures a landowner has ample opportunity to investigate their claim prior to filing a lawsuit.”
The case now returns to the trial court to review in light of this Supreme Court opinion, meaning that the lower court has to now review evidence as to whether the lease expired due to nonproduction prior to 1999.
“This case didn’t answer the specific question as to whether the Brownes lease is still in effect; that will be for the trial court to determine. But from a general standpoint, this is an important clarification of the law for those who believe their oil and gas lease has expired on its own terms, such as due to nonproduction,” Curtis said.