Forced Pooling

Before drilling an oil and gas well in the state of Ohio, a driller must first apply for a permit from the Ohio Department of Natural Resources (ODNR).  Part of the driller’s permit application includes a map indicating the leased lands the driller wants to include in the drilling unit.  Several considerations dictate the size this drilling unit can be.  The underlying oil and gas lease, for example, might specify a maximum unit size.  Ohio law also speaks to minimum well unit sizes. Generally speaking, the deeper the well, the larger the unit size must be.   A vertical well drilled deeper than 4,000 feet requires 40 acres of unitized land.  Horizontal wells, like those drilled in the Utica shale have …

Read More

Implied Covenant to Reasonably Develop – Geologic Formations

In a previous post I wrote about certain terms that are implied in all mineral leases: the covenant to reasonably develop.  In that article I described how a judge might cancel a certain area of an oil and gas lease if the producer hadn’t reasonably developed all of it.
This same idea can be applied to unused geological formations.  Let’s assume an energy company (the “lessee”) takes a lease for a 200 acre farm.  Let’s also assume that the lessee successfully drills five 40-acre wells on the acreage thirty years ago.  These five wells are all relatively shallow, and seek to produce oil and gas from the Clinton Sandstone geological formation.  Now, it should be pretty clear that the lessee has …

Read More

Implied Covenant to Reasonably Develop – Acreage

Many of my clients come to me hoping that I can help break their oil and gas lease.  As a general proposition, oil and gas leases are hard to terminate.  Given that they are drafted by oil and gas companies, it should not be surprising that they often favor the oil and gas companies themselves.  Every landowner’s situation will be different, but as long as the lessee to the oil and gas lease (the producer) pays a royalty to the lessor (the landowner), the lease is nearly bullet-proof.
However, there might be other ways to terminate an oil and gas lease even if the lessee is paying a royalty to the landowner.  One particular method to cancel an oil and gas …

Read More

Class Action Landowner Royalty Litigation

Twice I have successfully represented large groups of landowners regarding the proper calculation of landowner royalties.  The first case was Charton v. MB Operating Co. Inc., (1990 CV 110417), which involved about two thousand landowners in Tuscarawas County, Ohio; the matter was filed as a class action.  In that case, it was alleged that MB Operating was deducting about 25% of landowner’s natural gas royalties to cover its costs of transporting and marketing same.  Because MB Operating used a number of different lease forms, and because those forms did not have consistent language which addressed how royalties were to be calculated, there was a concern that the class members claims might not meet the commonality requirement under class action rules.  …

Read More

Ohio’s Dormant Minerals Act – Ohio’s Courts Weigh In

Below is an excerpt from a presentation I gave on November 8, 2013 for the Ohio Association of Justice Seminar.  A broader overview of Ohio’s Dormant Mineral’s Act can be found here.
I.  Introduction
Commencing in the spring of 2010, eastern Ohio experienced an unprecedented oil and gas leasing boom due to the discovery of the Utica Shale.  In the recent past, Ohio landowners might expect to receive $10-20/acre for signing an oil and gas lease.  Presently, prices in the range of $3,000-6,000 have become the norm.  Hundreds of wells have now been drilled throughout eastern Ohio into the Utica shale, with some being prolific producers.
Private ownership of lands in Ohio began around the mid 1800’s when grants were given out by …

Read More

Pipeline Negotiations

Since most of the leasing has slowed down in the Utica play here in eastern Ohio, many midstream companies are now approaching landowners about pipeline rights-of-way.  Pipeline agreements are typically drafted as a permanent easement, by which the pipeline company is granted a permanent right to access a strip of land on which to install and maintain a pipeline.  Because pipeline agreements can last a very long time, it is essential that landowners retain a lawyer who can interpret the language and negotiate with the pipeline company to change the terms.  Most of the agreements landowners receive from the pipeline company contain many terms that don’t adequately protect the land, and generally aren’t very favorable to the landowner.  On top …

Read More

Mineral Rights, Survivorship, and Probate

I am regularly surprised at how our estate planning practice overlaps with our oil and gas practice.   Lately I have helped a number of clients navigate the re-titling of an ancestor’s mineral interest by working through the probate courts.  When an individual dies, the probate court takes all of the real property titled in the deceased person’s name and determines the new owner.  The same is true of oil, gas, and mineral interests, as they are real property.
This process is fairly straightforward if the individual had a will that clearly stated where they wanted these interests to go.  Even so, the probate court must approve of the transfer.  This can be a lengthy process and is subject to court …

Read More

Ohio’s Dormant Minerals Act – Overview

This is the first part of a series of articles about Ohio’s Dormant Minerals Act.  Click here for a more detailed description of how Ohio Courts interpret Ohio’s Dormant Minerals Act.
Oil and gas companies go to great lengths to determine if the person who signed a lease is in fact the true owner of the minerals.  It is not uncommon for a landowner to sign a lease and only be paid for 1/2 of what was originally promised, simply because the landowner only actually owned 1/2 of the minerals underneath her land.  At that point, the oil and gas company tracks down the other 1/2 mineral owner so they can enjoy the full benefits of leasing a 100% mineral interest.  …

Read More

Oil and Gas update – October 2013

We have been quite busy since our last update.  Most -if not all- of the most valuable lands have already been leased, and energy companies have essentially staked out their positions.  An incredible 169 wells are currently producing from the Utica shale in eastern Ohio.  Chesapeake Energy is far and away the biggest producer in the region, as they operate 114 of these 169 wells.  The lion’s share of these producing wells are in Carroll county.  Carroll saw such a boom due to its underlying geology, but also because it had never seen significant oil and gas development.  As a result, energy companies like Chesapeake did not need to navigate around already existing wells and older leases: it had a …

Read More

Landowner Royalty Calculations

One of the questions we’ve been getting a lot of recently is: “how are my oil and gas royalties calculated?”  There are actually a few different ways to answer this question.  The first angle has to do with how a royalty is calculated as part of a drilling unit.  Let’s say that you own 50 acres in a 100 acre drilling unit.  Your lease probably says you are to earn 1/8 (or 12.5%) of all oil and gas produced from the premises.  The premises in this instance is the 100 acre drilling unit, of which you only own 1/2 (50 acres = 1/2 of 100 acres).  Therefore, the entire drilling unit will earn 1/8 as a royalty.  Because your land …

Read More