Energy

Babst Calland: Ohio Court Reaches Decision on Lease Forfeiture Action

By Michael K. Reer

On August 14, 2015, the Ohio Fifth District Court of Appeals issued a decision in Armstrong v. Chesapeake Exploration, L.L.C., deciding that the plaintiffs may not pursue an action seeking lease forfeiture based on the nonpayment of oil and natural gas royalties absent an explicit lease provision allowing them to do so [enhanced opinion available to lexis.com subscribers | Lexis Advance]. The plaintiffs alleged that Chesapeake failed to pay royalties owed on oil and natural gas production after the plaintiffs notified the company of their acquisition of the property from the former lessors. The court found, however, that absent a clause in the lease allowing the lessor to declare a forfeiture for the nonpayment of royalties, nonpayment merely gives rise to an action for damages and not cancellation.

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