Federal court: Oil and gas lease is no longer valid

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ST. CLAIRSVILLE, Ohio — A federal judge ruled in favor of a Belmont County family and declared an oil and gas lease held by Hess Ohio Resources as invalid Jan. 2.

It is second time since September a lease with Hess Ohio Resources has been found invalid.

Belmont County

Anthony and Nancy Kelich own about 90 acres of property in Richland Township in Belmont County.

The couple signed an oil and gas lease with Mason Dixon Energy Inc. on Dec. 21, 2006. The lease was eventually acquired by Hess Ohio Resources, LLC.

The argument

The Keliches argued the (five-year) lease terminated after the first year of the additional term of their lease. They argued the lease terminated because drilling operations had not began and the lease did not permit Hess Ohio to tender delay rentals during the additional term in order to delay drilling.

Hess Ohio argued the lease is still valid and enforceable because it provides Hess Ohio the opportunity to tender annual delay rentals throughout the entire primary term, which it contends consists of both the first five years of the lease and the entire five years of the additional term.

The company argued the Keliches’ lease would not terminate until 2016.

Judge’s ruling

U.S. District Court Judge Michael H. Watson ruled the lease be terminated on its own terms effective Dec. 20, 2011, and not 2016.

He declared it was terminated because Hess Ohio Resources had not begun drilling or paid the optional delay rental.

Watson wrote, “In order to delay drilling obligations into year six, Lessee (Hess Oil Resources) must both buy the extension period and pay a delay rental in year five.

As Lessee did not pay a delay rental payment in year five, the court concludes the lease terminated at the end of year five by its own terms. As such, plaintiffs (Keliches) are entitled to summary judgment.”

Second decision

This is the second decision to go against Hess Ohio Resources on this particular Mason Dixon lease. Last September, Jefferson County residents Steve and Melissa Griffith were also victorious against Hess Ohio Resources in a separate case in U.S. District Court for the Southern District of Ohio in Columbus.

Attorney Christopher Gagin, one of the attorneys who led the case, said the case is important because a second federal court has declared the lease expired under its own terms.

Hess Ohio Resources

Hess Ohio Resources may continue to challenge the lawsuit.

“With the Kelich case, we disagree with the court’s opinion and plan to move for reconsideration or appeal,” said company spokesman, Lorrie Hecker, director of global communications for Hess Corporation.

About the Author

Kristy Foster Seachrist lives in Columbiana County raising sheep and horses. She earned her degree from Youngstown State University and has worked in both print and broadcast journalism. You can follow her on Twitter at http://twitter.com/fosterk96. More Stories by Kristy Foster Seachrist

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