Oil and Gas Protection Leases – A Good Idea?

What’s a Protection Lease?
Suppose there is an issue with the title to minerals under a 100 acre farm and it is clear that either Party A owns those minerals or Party B owns them.  Suppose further that this farm sits in the middle of a planned unit for a horizontal Utica shale well.  What can an oil and gas producer do to fix that situation?  More frequently, producers are using ‘protection’ leases to address this situation.
In the above example, the producer would obtain leases from both Party A and Party B, paying only a nominal amount upon signing of the lease.  A side agreement is also signed where all agree that any production royalties due on the acreage will be …

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Unresolved Issues with Ohio’s Dormant Mineral Statute

Background
Over the past few years, Ohio’s courts, at all levels, have dealt with a number of issues pertaining to O.R.C. 5301.56, often referred to as Ohio’s dormant mineral statute. At this point in time, several such issues are about to be ruled upon by Ohio’s Supreme Court. One issue of importance, however, has received little mention in court rulings to date. That issue concerns the notice requirements by a landowner seeking to recapture dormant minerals. More particularly, what are those requirements?
Notice Requirements
(E) Before a mineral interest becomes vested under division (B) of this section in the owner of the surface of the lands subject to the interest, the owner of the surface of the lands subject to the interest shall …

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Obtaining Unexpected Profits from Ohio’s Dormant Minerals Act

Overview
Ohio’s dormant minerals act (DMA) is designed to rejuvenate abandoned oil and gas reservations by granting them to the surface owner (a more detailed explanation of the DMA can be found here).
A basic DMA process with one oil and gas holder:
In a very basic scenario, the Surface Owner notifies the oil and gas Holder that their rights will be declared abandoned in 60 days.  In order to retain their interests, the Holder must record a claim form prior to the 60th day.  A timely filed claim form shuts down the whole process: the Surface Owner cannot re-capture the Holder’s interests.
A complex DMA process with several oil and gas holders:
In a more typical scenario, there are several oil and gas Holders, …

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Oil and Gas Lease Ownership Challenges

Below are the materials the National Business Institute asked me to prepare for a seminar on Oil and Gas law.
LEASE / OWNERSHIP CHALLENGES, DISPUTES AND NEGOTIATIONS
A.  Recent case law and litigation trends
Though Ohio was one of the earliest states to have commercial production of oil and gas, surprisingly, it has not developed much of a body of case law in the field of oil and gas.  Frequently, the laws of other states must be reviewed to find cases on point – Texas, Oklahoma and Louisiana seem to have the most published opinions concerning oil and gas.
The advent of the Utica shale has changed things.  Numerous oil and gas cases have been filed in Ohio over the last several years and …

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Non-Consenting Landowners and Conflicts Between Leases

This article discusses situations arising when several people own the same piece of land, and only some of them sign an oil and gas lease.  Resolving this issue requires a discussion of basic property ownership principles.
Types of Land Ownership
Ownership in land takes many forms.  Some individuals are the sole owner of their land.  Another piece of land could be owned by several people, such as when brothers and sisters inherit land from a parent.  This joint ownership of a piece of property is usually called a tenancy in common, with the owners themselves known as tenants in common , or co-tenants.
Settling Disputes Between Co-Tenants
Owning property with others may very well result in disputes about how the property should be …

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Why am I Still Receiving Royalty Checks?

I sold my property but did not reserve the mineral rights. Why am I still receiving royalty checks?
If you did not reserve mineral rights when you sold your property, you are almost certainly not entitled to royalty checks anymore. The reason the oil and gas company keeps sending them is simple: they don’t know that the property has been sold. Somebody has to tell them. Just because they keep sending checks does not mean that you are entitled to them.
Typically the new owner takes this responsibility upon themselves because they want to start receiving royalty checks. Sometimes, however, they forget. As the former owner, you want to get this cleaned up so that the company doesn’t continue to report this …

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Getting an Oil and Gas Company to Change Who They Pay

I bought property with an existing lease on it. What do I do? How do I get an oil and gas company to update their records and add me as the current owner?
Most oil and gas leases (even really old ones) contain some variation of this phrase: “No change of ownership shall be binding on the Lessee until it is duly notified.” This is legalese for: the oil and gas company will keep paying the old owner until the new owner speaks up and shows ownership.
When you think about it, this makes sense: oil and gas companies cannot be responsible for watching every courthouse in the state to see when a property changes hands. Instead they put the burden on …

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Fracking Bans and Eminent Domain

As shale drilling increases across the country, fracking bans do, too.  In New York, for example, more than 50 municipalities have issued moratoriums or even outright bans on fracking.  Many Ohio municipalities have followed suit.  A lawsuit addressing this issue is currently pending before the Ohio Supreme Court: Munroe Falls vs. Beck Energy.
Are municipal fracking bans legal?
This question is still being settled by Ohio courts.  We all know that municipalities are empowered to issue and enforce zoning laws that restrict the use of one’s property.  But does the power to zone also permit them to ban an industrial process like fracking?  This exact issue is before New York’s top court.  The issue is also present in Ohio: one state law …

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Free Gas Issues

Many oil and gas leases provide the lessor with free gas.  This provision was fairly common in older leases, but has disappeared to a large extent for newer leases tailored to shale gas wells.  Here is a list of frequently asked questions and concerns about landowners exercising their right to free gas under an oil and gas lease:
Who is entitled to free gas?
You may be entitled to free gas if the oil and gas lease affecting your land contains a free gas clause, and if no other houses already use it.  Read your lease carefully, and look for free gas language.  Before you call your gas company about free gas, check to be sure that neighboring houses aren’t already taking …

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Forced Pooling – Trends, Benefits and Detriments

Recently I wrote about Ohio’s mechanisms for forcing unleased mineral owners into a drilling unit.  Oil and gas producers have increasingly started to rely on these mechanisms to drill  horizontal wells to the Utica / Point Pleasant shale formation in eastern Ohio.  These same laws require transparency for these procedures, and as part of a public records request, I obtained several recent orders approving the forced unitization of unleased mineral owners in various parts of Ohio.   I was hoping that I could gain some insight on the issue of whether a landowner is better off signing a proposed lease or being forced into a drilling unit under the applicable statute.  Having reviewed these unitization orders, I offer the following observations:
Producers …

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