Instead of setting a precedent and choosing an umbrella approach, the Supreme Court of Ohio refused to adopt a default rule regarding the deduction of postproduction costs from landowner royalties, according to JD Supra business Advisor.

The Supreme Court ruled that determining whether postproduction costs may be deducted from landowner royalties will be dependent on the lease language. The Court didn’t adopt a default rule Ohio should follow as a result of the decision was to handle such matters on a lease-by-lease basis.

The two most common approaches to determining the responsibility of postproduction costs are “at the well” rule, which permits the deduction of postproduction costs, or the “marketable product” rule, which limits the deduction of postproduction costs under certain circumstances.

The decision could have consequences for both landowners and producers.

Learn more: JD Supra Business Advisor > Ohio Supreme Court Rules in Landowner Royalty Case