ST. CLAIRSVILLE - A court ruling on an oil and gas lease could have wide repercussions for other lease agreements.
The decision was made Friday by Belmont County Common Pleas Court Judge Frank Fregiato, who ruled in the case of the Oxford Oil Company vs the West family. On October 2011 Oxford filed suit against the Wests for several issues including breach of contract. The Wests filed a counter claim in December of 2011. Among their allegations was that the lease is in perpetuity and therefore void.
Fregiato found that because the lease is for a period of five years "and so much longer" as there is production or a capacity to be productive in the sole opinion of Oxford, as well as several other provisos, then in effect the lease has no term, no specific end point or set duration.
"Oxford has constructed a no-term lease which may be extended indefinitely," stated Fregiato in his decision. "Oxford has retained the right to determine the nature of its performance and the length of its obligations and interest in the property."
Fregiato went on to declare all oil and gas leases which are leases in perpetuity void from the beginning.
Attorney Joe Vavra, who represented the Whites, said that the ruling was specific to this case only, but noted that the lease Oxford used is the same lease that the company uses for all its dealings.
"Potentially, if there are more suits filed this could end up effecting more individuals. People that were involved with Oxford," Vavra said.
He pointed out similar rulings, such as the matter of the Belmont Hills Country Club vs Beck Energy.
He said the wording of perpetuity creates a faulty lease.
"Essentially it could go on forever," he said. "And keep these individuals bound up with really no production or no benefit to the landowner."
He gave the opinion that the ruling would not automatically nullify every existing lease using that language, but that such leases could more easily be voided.
"They would have to go through the proper channels and go through the proceedings," he said. "Everything is facts-specific, but leases similar to this would probably be construed the same way, I would imagine."
He added that other cases that have had similar ruling are up on appeals.
"The court of appeals I think will be ruling on these issues, hopefully in the near future," he said.
He added that Fregiato's ruling sets a precedent.
"My office has a few of these cases," he said. "I couldn't state exactly how many of these leases are out there and how many Oxford was using at the time so I couldn't say, but I would imagine it's a decent amount."
He considered the potential repercussions.
"I think it could end up freeing up a lot of landowners who signed under these faulty leases in the past, could free up their lands to sign new leases now," he said.
The recorder's office could not give a precise number of Oxford leases, but noted 264 documents during the past two years, though not all of them are leases.
Fregiato was unavailable for further comment. Oxford was contacted for a statement but did not respond.
DeFrank can be reached at firstname.lastname@example.org