The right, but not the obligation, to renew an existing lease
As we discussed previously, state and federal courts in Ohio have been asked to interpret the meaning of “paragraph 14” in oil and gas leases. On Oct. 30, 2013, the Sixth Circuit Court of Appeals held that paragraph 14 does not require a lessee to match a third-party offer or have the lease terminated. The federal court opinion issued in Stewart v. Chesapeake Exploration, L.L.C., 2013 U.S. App. LEXIS 22302, 2013 FED App. 0928N (6th Cir.), 2013 WL 5832343 (6th Cir. Ohio 2013) is consistent with other holdings interpreting this lease provision.
The court found the landowners’ interpretation “strange at best,” “implausible” and in conflict with several other provisions in the lease.
The court closed by holding:
“In summary, we agree with the district court that, by its terms, Paragraph 14 does not grant the landowners a right to terminate their leases, but instead grants Chesapeake a ‘preferential right to renew’ them.”