Part 2 of “What is this Thing Called Lease?” is the second installment of a series of articles that examines the essential nature of the oil and gas lease and the estate that it conveys. Having discussed in Part 1 whether oil and gas may be owned and transferred in situ, Part 2 of the series addresses a significant development in the treatment of oil and gas leases in Ohio—the five recent common pleas court decisions (Hupp v. Beck Energy Corporation, Monroe C.P. No. 2011-345; Bohlen v. Anadarko E&P Onshore LLC, Case No. 13-OT-167 (Washington County, C.P. March 27, 2014)); Bentley v. Beck Energy Corporation, Case No. 11-CV-513 (Belmont County C.P. September 16, 2013); Oxford Oil Company v. West, Case No. 11-CV-435 (Belmont County C.P. September 16, 2013); and Belmont Hills Country Club v. Beck Energy Corporation, Case No. 11-CV-290 (Belmont County C.P., July 8, 2013)) that would render most oil and gas leases a nullity, declaring them void ab initio as perpetual leases that violate Ohio’s public policy.
Part 2 of “What is this Thing Called Lease?” discusses the line of Ohio case law establishing that a typical oil and gas lease conveys a fee simple determinable interest, which by its very nature is of potential indefinite duration and has long been recognized in Ohio as a legal and valid interest in property. It contrasts these decisions with the “void abinitio” cases, which found the oil and gas leases at issue void ab initio as a matter of public policy, holdings premised upon the conclusion that an oil and gas lease is a perpetual, no-term lease that could potentially hold the leased premises in perpetuity without any production ever taking place. Part 2 provides an overview of the reasoning applied by the courts in the “void ab initio” cases, setting the stage for Part 3 of the series, which provides a more extensive analysis of why the common pleas courts got it wrong, as well as Part 4, which challenges the “backup” conclusions reached by these courts that would find the leases under consideration to have expired even if the public-policy rationale was rejected.