Court of Appeals of Ohio, Seventh District, Monroe
Appeal from Court of Common Pleas of Monroe County, Ohio Case
Plaintiffs-Appellees Cyril and Rosemary Burkhart Attorney
Defendants-Appellants Jeff Miley dba Miley Gas Co. Attorney
William Taylor Attorney Scott Eickelberger Attorney David
Tarbert Attorney Ryan Linn
Defendant-Appellant Antero Resources Attorney Lyle Brown
Attorney Melanie Morgan-Norris Attorney J. West
Amicus Curiae Ohio Oil and Gas Association Attorney Gregory
Russel Attorney Peter Lusenhop Attorney Aaron Williams
JUDGES: Hon. Gene Donofrio Hon. Mary DeGenaro Hon. Carol Ann
Defendant-appellant, Antero Resources Corporation, along with
defendant-appellant, Jeff Miley d.b.a. Miley Gas Company,
appeal from a Monroe County Common Pleas Court judgment,
resulting from a bench trial, finding that a certain oil and
gas lease terminated due to the failure of the well at issue
to produce in paying quantities.
Plaintiff-appellee, Rosemary Burkhart, individually and as
the representative of the estate of Cyril Burkhart, is the
owner of the mineral rights to a 66-acre parcel of property
located in Seneca Township in Monroe County (the Property).
By deed recorded February 2, 1945, Aloysius and Celia
Burkhart, as lessors, executed an oil and gas lease with
Burns Drilling Company, as lessee (the Lease). Aloysius and
Celia were Cyril Burkhart's parents. Aloysius's and
Celia's mineral interest passed to Cyril. When Cyril
passed away, his mineral interest passed to Rosemary.
The Lease provides that it is for a term of five years and
"so much longer thereafter as oil, gas or their
constituents are in paying quantities thereon."
The Lease covers the entire property. A single well sits on
the property (the Well). The Well was drilled in 1945. In
1992, the Burkharts transferred ownership of the
Property's surface rights to Leo and Judith Loraditch.
The Burkharts reserved the mineral rights to the Property.
On October 11, 2011, the Burkharts recorded a Preservation
Notice of Ownership in Oil and Gas Rights for the purpose of
preserving their reserved mineral interest.
In 2011, defendant-appellant, Jeff Miley d.b.a. Miley Gas
Company (Miley), purchased the Well from RMB Production
Corporation. The Lease was also assigned to Miley. The
assignment of the Lease from RMB to Miley was recorded April
12, 2011. In 2012, Miley assigned the deep rights of the
Lease to defendant-appellant, Antero Resources Corporation
On July 26, 2013, Burkhart filed a complaint against Miley.
The complaint alleged that the primary term of the Lease
expired on December 6, 1949, and there has not been
sufficient production to continue the Lease. Therefore,
Burkhart sought a declaration that the Lease expired under
its own terms. She later amended the complaint to add Antero
as a defendant.
The case proceeded to a bench trial on October 1, 2014. The
trial court found that Miley had operated the Well in good
faith and that it was profitable. The court found that Miley
had declared a profit from its operation of the Well on tax
returns in 2011, 2012, and 2013.
The trial court found there was confusion regarding the name
and API number of the Well stemming from a sign hanging on
the wellhead identifying the Well as the "Burkhart, No.:
1Permit; Unknown." and the Form 7 (Request for Change of
Owner), which identified the Well as the "Burkhart No. 2
API 20368." The court went on to find that the evidence
demonstrated the Well located on the Property is actually the
Well designated as API No. 20368. It found that the argument
that Miley had been using the production from a well located
off of the Property (No. 20334) to hold the Lease was not
supported by the evidence. The court found that the Ohio
Department of Natural Resources (ODNR) records placed Well
No. 20334 in a location that did not match the legal
description of the Property. Moreover, the court found that
the drilling of Well No. 20334 was completed prior to the
execution of the Lease and the ODNR described this well as a
non-producing historic well. On the other hand, the court
found that Well No. 20368 is located in the southwest quarter
of section 4, in which a portion of the Property is also
located. And ODNR records reflected that Well No. 20368 was
drilled approximately one month after the execution of the
Thus, the court found that the production from Well No. 20368
located on the Property was continuous and profitable.
Therefore the court found that the Lease remained in full
force because the Well was producing in paying quantities.
The court entered judgment in favor of Miley and Antero.
Following the judgment in favor Miley and Antero, Burkhart
filed a motion for new trial or to amend the court's
findings of fact and conclusions of law. Burkhart alleged
that Jeff Miley made knowing misrepresentations to the court
during the trial. In the motion, Burkhart did not take issue
with the court's finding that the Well was located on the
Property. But Burkhart argued that the court's finding
that Miley made a profit from 2011-2013 was incorrect. She
noted that Jeff Miley and his wife Meleesa both testified
that they declared a profit in those years. But Burkhart
stated that Miley actually declared a loss in 2012 and 2013.
She stated that she obtained this information by way of a
motion to compel in another case where Miley produced his tax
records. She further asserted that Miley's tax records
reported money spent for contract labor, repairs, and
maintenance, contrary to his testimony that he did his own
The trial court found that Burkhart presented good cause to
reopen its previous judgment and take additional testimony on
the issue of Miley's tax returns.
The court held a hearing where it took additional testimony
and evidence on the sole issue of whether Miley had been
profitably producing oil or gas from the Well under the
The court found that at the initial trial, Jeff Miley had
testified for the relevant tax years of 2010-2013, Miley was
profitable and did not declare a loss. But the court found
Miley's tax records showed otherwise. It noted that Miley
declared a loss in 2012 and 2013. Additionally, it found that
the tax returns demonstrated that much of Miley's gross
revenue did not come from the sale of oil and gas but from
contract work that Jeff Miley performed for other oil and gas
operators. The court went on to find that Miley did not
report any production for 2011-2103 until late 2013, when
Antero suggested that Miley submit its production to the
ODNR. Based on this disclosure, the court inferred that the
2011 and 2012 production numbers were merely estimates. The
court noted it was undisputed by Jeff Miley that it would be
virtually impossible for any third party to look at
documentary evidence and independently verify that the Well
is profitable. The court also noted, however, that
Miley's tax preparer testified that the Schedule C forms
for 2012 and 2013, did not show the expenses associated with
the production of oil and gas exceeded the revenues from the
sale of oil and gas.
The trial court found that Miley has a major financial
incentive to claim that the Well is profitable. It further
found significant that Miley did not report any production
for the years 2011 and 2012, until directed by Antero do to
so in late 2013. Finally, the court found that a lessee who
claims his lease is profitable yet whose tax return shows a
loss casts "real doubt" on the actual
profitability. Based on these findings, the trial court found
the Lease was cancelled for lack of production. Therefore,
the court vacated its previous judgment and entered judgment
in favor of Burkhart.
Antero subsequently filed a motion for new trial and to