PETOSKEY, MI -- In a story 7&4 News has been following, a Charlevoix County District Judge has dismissed a landowner lawsuit seeking payment for an oil and gas lease that was rejected because of a title defect.
You may remember more than 100 mineral rights owners signed contracts with Chesapeake Energy last year with the promise of big bucks for the oil and gas on their land if their titles were clear.
The judge said the company had the right to terminate the contracts and there's nothing in the contract to give landowners time to cure the title defect in order to get paid.
Below is the news release sent out by Chesapeake lawyers in full:
Charlevoix County District Court Judge Richard May has dismissed a landowner lawsuit seeking payment for an oil and gas lease that was rejected when it was revealed that the landowner had multiple mortgages on the property.
"We welcome the court’s ruling and believe it correctly reflects our position that civil lawsuits filed over rejected oil and gas lease agreements are without legal merit,” Kevin Roragen, an attorney with the Lansing law firm Loomis, Ewert, Parsley, Davis & Gotting, PC, representing the oil and gas companies, said today. “The court recognized that these lease transactions were subject to title approval by our clients, in this case Western Land Services Inc. of Ludington, Mich. When liens or mortgages are discovered, the oil and gas company has a clear right under the agreement to reject the proposed lease.”
Judge May’s Tuesday ruling involved a proposed lease covering some 15 acres in South Arm Township, Charlevoix County. (Case No. 11-007-GC Charlevoix County District Court.)
“The landowners argued that our clients had a duty to give them an opportunity to clear up or remove the mortgages before rejecting the proposed lease, but the written agreement clearly contained no such requirement,” Roragen said. “The court agreed and dismissed the case.”
“While most mineral owners are satisfied with their lease transactions, some landowners’ leases were not closed because of the defects and this was understandably disappointing to them,” said Petoskey attorney Steve Barney of the Plunkett Cooney law firm, who also represents affiliates and representatives of Chesapeake Energy Corp. “These disappointed landowners are in no way entitled to payments, however, as the court made clear.”
Chesapeake paid more than $325 million to Michigan mineral owners during last year’s boom in oil and gas leasing activity in Northern Michigan.
Chesapeake is the largest oil and natural gas leaseholder in the United States, with almost 15 million acres of leases from hundreds of thousands of lessors who have been paid more than $15 billion in lease bonuses and royalties. As a result of these leases and its drilling and development expertise, the company is also now the second-largest producer of natural gas in the United States and a top-15 producer of oil. Chesapeake acquired approximately 90,000 leases in 2010.
