Atty. Eric Johnson Gives Speech at Covelli Centre

Late in 2011, I was asked to give a speech at the first annual Youngstown Ohio Utica & Natural Gas Conference & Expo, held at the Covelli Centre in downtown Youngstown.  Our friends over at the Youngstown/Warren Chamber of Commerce were kind enough to record the bulk of my presentation.  It is viewable below: 

Oil and Gas Lease Amendments

Now that much of the new leasing has slowed down, many of our clients are being asked to sign a lease amendment.  These people are already under a lease from many years ago.  The trouble with an old lease is that they were written to accommodate shallower wells, as well as the way the oil and gas business operated thirty some years ago.  The environment has changed dramatically since then, and it shouldn't be surprising that the language in leases has, too.   Energy companies therefore need to modify the terms of the old lease to allow them to economically drill new Utica wells.Most frequently, the term of an old lease that needs changed has to do with unitization.  Old leases will vary in their unitization limit, but it is a pretty safe bet to assume that they don't allow for 1,280 acre drilling units that energy companies prefer today.  Less frequently yet still common is an amendment to the landowner's approval of assignment.  Oil and gas leases are a lot like baseball cards: they can be sold and traded freely.  This makes it easier to develop drilling units.  If Company A is just 5 acres shy of its drilling unit, it can purchase the lease to that 5 acre parcel from Company B.  Some old leases require that before a lease can be assigned to another company that the landowner must first approve of its assignment.  This creates a burden for the company holding the lease and would slow down the development of drilling units.  For this reason, energy companies ask for the term to be removed in an oil and gas lease amendment.Typically there is no payment or bonus associated with signing a lease amendment.  However, the landowner should be encouraged that their land is now much more amenable to drilling.  The prospect of receiving good royalty money should be reassuring.  Call us today if you have been offered a lease amendment and would like us to review it with you.

Ohio Oil and Gas Leasing Update July 2012

Six months ago I wrote an update on Ohio oil and gas leasing. Since that time, lease activity in Ohio has changed somewhat. New Utica wells continue to be drilled, but it can take a while to learn about their production capabilities. Some of these wells will be drilled and left alone for a period of at least  4 weeks. This is done for geological reasons and has to do with the pressure of the reservoir. Drilling companies also like to keep the success of their wells secret lest they inform their competitors of valuable drilling strategies. For the most part, the same energy companies I mentioned in January are still around: Chesapeake, Devon, Hillcorp, Shell, Anadarko, Hess, Gulfport, Consol, and XTO (Exxon). A few others have shown up, too: BP has recently entered the area, and we have seen renewed action from Enervest. We have also had a chance to review a number of Halcon oil and gas leases. Again, each company typically has a specific area of interest in Ohio, but other companies like Chesapeake are casting a pretty wide net.Even though we have seen a few new energy companies showing interest in Ohio, leasing has slowed down a bit since January. Most if not all of the largest parcels have been leased. Now companies are looking to the smaller landowners who have been left aside in favor of the larger parcels. Most of our new clients lately own fewer than 5 acres of land. Some even own less than 1 acre. Not all of our clients are asking us to review a new lease that has been offered to them, however. Many energy companies interested in the Utica shale in eastern Ohio are asking landowners that have old leases to sign a lease amendment that would change the terms of the original lease.  Our clients have also received requests to sign a pipeline agreement. Infrastructure is essential to developing the Utica field here in eastern Ohio. Pipeline agreements and right-of-ways are instrumental to that. Our firm is well-equipped to help landowners at any stage in becoming involved in the Utica boom. Call us today if you'd like our guidance.

Johnson & Johnson featured in Washington Post

Our expertise in the field of oil and gas law is drawn on from all over the country. Not too long ago the Washington Post ran an article about the Utica shale and its implications for eastern Ohio. It cites an article I wrote just a little while ago. You can read the article from the Washington Post here.

Johnson & Johnson Featured in the Business Journal

Our friends over at The Business Journal recently ran an article about us. It describes the increased business we've been doing in conjunction with the oil and gas activity in the area. After a long lull in the local oil and gas industry, we've found ourselves quite busy amidst the Utica shale play. Our reputation continues to bring us new clients, and we're very grateful to those who recommend our oil and gas attorneys to friends and neighbors.

Buying Land With Mineral Rights

We get lots of phone calls from folks who want to purchase land, either at a sheriff's sale, at auction, or just from a local seller. They want to know if the mineral rights are included in the sale. These people want to buy land and quickly lease the mineral rights for a sizable signing bonus that can often offset a large portion of what they just paid for the land.In a private transaction, the Seller will frequently make that information available to the buyer. In an auction or at a sheriff's sale, most often the auction or title company will make no guarantees about the mineral rights. Think of the person who relies on a title insurance guarantee that certain land he wants to buy includes the minerals. The buyer then bids a really high price at auction and wins the land, thinking that he now owns the mineral rights. If this person then tries to lease his land for oil and gas exploration and comes to learn that he does not own the mineral rights to the land he just bought, he will probably be more than a little mad at the title insurance company. Because the value of minerals is so high right now, title insurance companies are staying away from guaranteeing them in land transactions. They have too much to lose.So how do I know if the land I want to buy comes with the minerals? There are a couple of ways to accomplish this. One of them is obviously to spend a lot of time in the courthouse recorder's office and simply research the issue. That is how title insurance companies approach the question. This process can be confusing and labor-intensive, however. Other methods exist that approach the answer to this question in a slightly different way. Contact us today if you are considering buying property but want to know if it includes the mineral rights. We can help.

Oil and Gas Valuations

It's always surprising for us to see how our major practice areas come to overlap.  Oil and gas law doesn't have an obvious nexus with estate planning and the probate process.  However, given that estate planning typically involves carefully allocating assets to maximize their utility for family or friends, it shouldn't be a surprise that valuable oil and gas rights might enter that equation.Nobody could have predicted the recent surge in oil and gas activity in Ohio.  That's why many of our clients receiving oil and gas money come in for us to re-evaluate their estates.  How can oil and gas payments affect your estate?   Because mineral rights (which includes oil and gas rights) have recently seen an explosion in value, it makes sense that estates are valued to reflect that change.  How are oil and gas rights valued?  There are many factors that can influence the value of an estate's mineral interest.  Much of it depends on where the minerals are located.  Another part involves the exact nature of what the estate owns.  Johnson & Johnson often is asked to make these valuations on behalf of our client's estates.  Please contact us if your current estate plan does not take into consideration oil and gas or other mineral rights.

Minimizing Tax Impact of Oil and Gas Royalties

The impact oil and gas leasing has had on Ohio is remarkable.  A farmer who struggled to make ends meet one year could find himself with an income tax bill he never imagined the next.  Though we Ohioans have been blessed by these essential resources, allocating their value can be troublesome from a financial standpoint.  Many people may find themselves unsure of what to do with signing bonus money.  It doesn't take a financial adviser to outline the basic options: save it or spend it.  Prudence dictates the best of these two options.Everyone's financial situation is different.  However, people from all types of situations certainly have people that they care about and would like to support if they are able.  We firmly believe that one's most valuable assets are their family members and loved ones.  Sharing the benefit of oil and gas leasing monies and royalties with children, grandchildren and others can be accomplished in a number of ways.  Choosing the method right for you and your family takes experience, especially when the tax man becomes involved.    The threat of federal taxes increasing seems almost constant.  State laws can change, too.  At Johnson & Johnson, we have more than 25 years of experience in counseling clients to help manage their estates efficiently to minimize their tax exposure.  Have you recently become the beneficiary of oil and gas monies?  If so, contact our firm today for a basic estate plan that can ensure that your loved ones can share in this blessing when they might need it most.