Sixth Circuit holds that filing of a DPU may constitute operations

In Henry v. Chesapeake, Case No. 12-4090, January 14, 2014, the United States Court of Appeals for the Sixth Circuit  held that by filing a Declaration of Pooled Unit (DPU) with the Ohio Department of Natural Resources, Chesapeake Appalachia, L.L.C. (“Chesapeake”) engaged in “operations” under the terms of the lease.  

Plaintiffs leased approximately 447 acres of land in 2006 for a five-year term.  The habendum clause provided that “Any Operations” would extend the lease.  The lease defined operations as inter alia, “any acts in search for or in an endeavor to obtain, maintain or increase the production of oil and/or gas[.]”

On October 14, 2011, three days for the before the lease was to expire, Chesapeake filed a DPU.  Plaintiffs then filed a lawsuit in the Jefferson County Court of Common Pleas, seeking to have the lease declared void.  Chesapeake removed the case to the United States District Court for the Southern District of Ohio, which granted summary judgment to Plaintiffs, holding the leases were void.

Chesapeake appealed, and the Sixth Circuit reversed, holding that by filing the DPU, Chesapeake engaged in “operations” under the terms of the lease, thereby extending the lease term.

Read the complete case here.

Ohio, Oil & Gas Litigation