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Abstract

This Note will focus on the law of four states: New York, Pennsylvania, Ohio, and West Virginia. The Background section of this note will give a description of the developments in these states that have rejuvenated the relevance of the interpretation of oil and gas leases in this region and explain why this is an important area of the law today. This section will also reveal the state of the laws regarding delay rental payments. States in this group are organized according to their treatment of the issue at hand. First, New York presents the strongest precedent upholding the extension of an oil and gas lease through delay rental payments. Ohio law provides that a lease terminates at the end of the primary term when no well is producing, even if delay rentals continue. West Virginia represents a state that is yet to definitively dispose of the issue. The Background will conclude with a brief review of the nature of the habendum clause of a lease, which is typically the relevant part of a lease regarding this issue. The next section, the Statement of the Case, will include a synopsis of the facts that led to Falcon. Although the court’s reasoning will be more extensively examined in the Analysis section, the Statement of the Case will briefly provide the bases of the court’s decision. The Analysis will be broken down into five main arguments in support of a uniform law regarding delay rental provisions in leases in this area. First, this section will demonstrate the importance of the development of a uniform law in this region. The next part of the Analysis shows why the very nature of the property right transferred in an oil and gas lease disfavors the extension of the term by delay rental payments. The third part will deal with the policy reasons for refusing to allow delay rentals to extend a lease beyond its primary term. These include recognition in each of these states of an implied or express covenant of development in oil and gas leases and public policy concerns with finding the most profitable use for property. Finally, this policy argument will conclude with an analysis of the alternatives available to the oil and gas lessee and why these alternatives further prove that Falcon presents the best model law concerning delay rental.

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