An Ohio court has determined that an Ohio lease cannot be terminated in spite of the company not making royalty payments.  The well was drilled.  We don’t have any information regarding whether the well was produced or even hooked up to a pipeline, but there is definitely a well there.  That’s probably enough under most leases to keep the lease alive.  But without production, there aren’t going to be any royalties paid.

You would think that in a situation like this the lessor would be able to cancel the lease, but that’s not the way Ohio law is.  It’s also not the way West Virginia law is.  In West Virginia you have to have what’s often called forfeiture language in your lease.  If you don’t, the only thing you can ask for is money damages.

For most of the people that we talk to here, money is all they’re ever going to get out of one of these leases.  There won’t be free gas, there won’t be benefits to the surface tract, there won’t be anything but money coming their way.  It doesn’t make sense to allow leases to be kept in place when money is not being paid.  But that’s the way the law is.

Make sure that you talk to a competent oil and gas attorney before you sign a lease.