Oil and Gas Leases: Extension and Renewal Clause

摘要

This case involves the same type of lease clause that was analyzed in Eastham v. Chesapeake Appalachia, LLC, 754 F.3d 356,182 O.&G.R. 163 (6th Cir. 2014). The plaintiffs all executed oil and gas leases to Great Lakes Energy Partners in 2007 and 2008 that had five-year primary terms and an extension and renewal clause that read: "Upon the expiration of this lease and within sixty (60) days thereinafter, Lessor grants to Lessee an option to extend or renew under similar terms a like lease." Prior to the end of each of the plaintiffs' primary terms, the defendants sent delay rental payment checks along with a letter notifying them that an extension of lease document had been filed in the County Recorder's office. The trial court granted the defendants' motion for summary judgment using the same rationale as had the United States District Court in Eastham v. Chesapeake Appalachia, LLC., 2013 U.S. Dist. LEXIS 133476 (Sep. 18, 2013), aff'd, 754 F.3d 356, 182 0.&G.R. 163 (6th Cir. 2014). Held: affirmed. As did the Sixth Circuit in Eastham, the court begins its analysis with a listing of the relevant canons of construction including the plain meaning canon and the four corners canon. Options are treated as offers which do not ripen into contracts until exercised. The court also notes that extension and renewal mean different things and that an option to extend means only that the duration of the prior agreement is lengthened but that the other terms remain the same. The court concludes that the option to extend contained in Paragraph 19 is for a limited time and thus is not violative of the Rule Against Perpetuities. The court further rejects the plaintiffs' claim that the trial court should have considered custom and practice evidence regarding the meaning of the extension and renewal clause. Because the language of the lease is unambiguous and there was nothing to indicate that the terms extend or renew were to be given any special meaning, the exclusion of such extrinsic evidence was appropriate. Finally, the court finds that the performance required under the leases to extend the lease was satisfied by the tender of the checks as required by the lease. The fact that some of the plaintiffs did not know that Chesapeake was the successor-in-interest to the original lessee did not affect the validity of the tender.