Jefferson Co. dairy farmer wins in court

STEUBENVILLE, Ohio  — A federal court ruled in favor of a Jefferson County dairy farmer and terminated his oil and gas lease.

U.S. District Judge Algenon L. Marbley granted a motion for summary judgment in favor of David E. Cameron, Stephen J. and Melissa Griffith, of Mount Pleasant, Ohio, Sept. 24.

Court decision

Marbley found their oil and gas leases expired after six years under their own terms. Hess Corporation, which now holds the lease rights, has argued that the Griffiths’ lease was valid for 10 years under the lease terms.

This court decision could affect up to 308 leases that Mason Dixon Energy originally obtained in 2006, 2007 and 2008 in Belmont, Jefferson and Harrison counties. The Mason Dixon leases were sold to Hess Energy in 2011.

Hess comment

Hess Energy declined to be interviewed, but said in a written statement they will be fighting back.

“We are surprised by the court’s decision and intend to challenge it vigorously through the appropriate court procedures,” according to a statement from a company spokesperson.

The Jefferson County landowners filed the original joint lawsuit in January 2012. Cameron owns approximately 166 acres and the Griffiths own approximately 228 acres.

The Griffiths signed their lease in 2007 and Cameron signed his lease in 2008, both with the Mason Dixon Corporation.

Invalid leases

Like similar lawsuits filed over oil and gas leases, both Cameron and the Griffiths claimed the leases are invalid.

According to the lawsuit, Cameron signed his lease without a notary present, and Stephen Griffith claims in the lawsuit he was told to sign his wife’s name without her present.

The landowners also claim the leases are fraudulent because they were never told about the potential Utica and Marcellus shale drilling. Instead, they understood the leases to be for the traditional Clinton wells.

No wells have been drilled on either property since the leases were signed.

Delay rentals

What the landowners are most upset about is the oil and gas company’s ability to hold their property through the delayed rentals without production. In essence, their land could be held without drilling for 10 years after they signed the leases.

According to the lawsuit, the Cameron lease is now in the delayed rental stage and the Griffiths’ lease has ended the primary term and is now entering the delayed rental term.

The outcome of the lawsuit could affect many landowners in Belmont, Jefferson and Harrison counties who signed leases with the Mason Dixon Corporation before the potential of the shale boom was public knowledge.

Some of the landowners leased their land for as little as $5 or $20 an acre like the Griffiths and have been waiting to get out of the lease as they have been entering the extended term.

Both Cameron and the Griffiths were supposed to receive $100 per acre of the delay rentals after the initial term of the lease expired. Although the checks were issued to both landowners, they did not cash them.

However, a statement in the lease agreement is what the Griffiths and Cameron used to get the court to help end the lease rather than waiting for the delay rental or lease extension to expire.

According to the lawsuit, their leases state “if operations for drilling are not commenced on the leased premises or on acreage pooled therewith, on or before twelve months from the date (June 14, 2007 in the Griffiths’ case), this lease shall then terminate as to both parties unless lessee (Mason Dixon), on or before the expiration of the said period, shall pay or tender to lessor the sum of $100 per mineral acre of the associated lease, hereinafter the called the ‘delay rental,’ which shall extend for 12 months the time within which drilling operations may be commenced.”