No Breach of Oil and Gas Lease For Failure to Timely Pay Royalties.

The plaintiffs are various landowners that entered into oil and gas leases with the defendant.  Two leases at issue contained the same provision that allowed the leases to consolidate the land involved into a single development area with all royalties from wells in the area to be divided between all of the lessors proportionally based on any particular lessor's acreage in the consolidated area.  The consolidated area was comprised of 228 acres with five wells being drilled in the area from 1954 through 1980 and two more being drilled between 2007 and 2012.  The plaintiffs' acreages were where the 2007-2012 wells were drilled which was within the consolidated area.  Some lessors, however, were not included in the well permit application that the defendant submitted to the state (OH) Department of Natural Resources (DNR).  The plaintiffs claimed that, as a result, the consolidated area was abrogated and that the plaintiffs were entitled to 100 percent of the royalty amount.  The trial court disagreed, granting the defendant's motion for judgment on the pleadings, based on the unambiguous lease language, and because a well permit application cannot abrogate or modify an oil and gas lease.  The court also held that any damages resulting from the calculation and distribution of royalties were pure economic losses barred by the economic loss doctrine.  K and D Farms, Ltd., et al. v. Enervest Operating, LLC, et al., No. 2015CA00038, 2015 Ohio App. LEXIS 4364 (Ohio Ct. App. Oct. 26, 2015).