Sixth Circuit Court of Appeals rules for Eclipse Resources in oil and gas lease dispute

On November 30, 2017, the Sixth Circuit Court of Appeals issued an opinion in Eclipse Resources - Ohio, LLC v. Madzia, 6th Cir. No. 17-3145, 2017 U.S. App. LEXIS 24230 (Nov. 30, 2017) affirming the lower court’s grant of summary judgment to Eclipse Resources in all respects. In this case, property owner Scott Madzia had filed suit alleging breaches of an oil and natural gas lease, a subsurface easement agreement, and bad faith on the part of Eclipse for failing to perform hydraulic fracturing operations on a well on his property.

In affirming the lower court’s summary judgment, the Sixth Circuit Court held that the language of the “lease unambiguously granted Eclipse the rights to drill for and to transport oil and gas through Madzia's property;” that the subsurface easement did not modify the rights granted in the lease because the “subject matter of the lease differ[ed] from that of the easement agreement;” that Eclipse’s use of a re-used affidavit did not violate the Ohio Revised Code and this argument was waived by Madzia’s refusal to sign the affidavit -- a breach of the further assurances clause of an amendment to the lease; and that Eclipse did not act in bad faith by failing to hydraulically fracture the initial well drilled on Madzia’s property because it was Eclipse’s option to decide whether to do so under the lease.

This case is likely to affect the language that landowners and production companies negotiate when entering into oil and gas leases in the future. Click here for a Bricker & Eckler summary of the decision.

Ohio, Oil & Gas Litigation