Forfeiture of Oil and Gas Leases

Consider this: in advance of closing, the title commitment reveals the existence of an oil or gas lease clouding title. Now what? The lessee is no longer in business or cannot be found and your client is unsure how to proceed. Your next step is to direct them to legal counsel because, under certain circumstances, the natural gas and oil lease can be declared forfeited, provided a very specific statutory process is followed.

First, the natural gas and oil lease had to have been recorded under Ohio Revised Code Section 5301.09, the statutory provision for recording a lease of natural gas and petroleum. Next, there cannot be any producing or drilling oil or gas wells on the property. If these two requirements have been met, the lease can be declared forfeited for the lessee’s (or their successors or assigns) failure to abide by covenants described in the lease or because the term of the lease is expired.

The forfeiture process starts with issuing a notice by certified mail, return receipt requested, to the lessee (or the lessee’s successors or assigns) at the lessee’s last known address. If service cannot be obtained, then notice must be provided by publication at least once in a newspaper of general circulation in the county in which the land Is located.

The notice be addressed to the lessee, shall contain a general description of the land, the number of acres, the date of the lease, the volume and page of the lease record where the lease is recorded, the cause of forfeiture and must advise the lessee of the lessor’s (owner) intent to declare the lease forfeited. If the lessee does not have the lease released within thirty days from the date of the receipt of the notice or publication, the lessor can file for record an affidavit of forfeiture with the county recorder. If the lessee does not release the lease, the affidavit of forfeiture may be recorded after thirty days but not more than sixty days from the date of proof of mailing or publication of the notice.

If the lessee claims that the lease is in full force and effect, within sixty days after the mailing or publication of the notice, the lessee must notify the lessor. The lessor must also file for record an affidavit with the office of the county recorder stating that the lease has not been forfeited and that the lessee still claims that the lease is in full force and effect.

If the lessee fails to claim that the lease is still in force, the lessor can file a notice of failure to file and thereafter the lease and any interested therein is vacated and cannot be enforced.

As set forth above, the process for forfeiture of an oil and gas lease is very detailed and follow a specific timeframe. The foregoing provides a quicker remedy for vacating an oil and gas lease without having to go through a longer court process to quiet the title. Any actions taken to forfeit an oil and gas lease should be taken through legal counsel, to assure the statutory process is followed and any questions are answered to your client’s satisfaction.