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‘Nuisance Oil’ Term in Contract Annoys Belmont County Landowner

April 4, 2015
Shale Play

BELLAIRE - Curtis Wallner is not sure what "nuisance oil" extracted via fracking is.

Neither is a spokesman for the Ohio Department of Natural Resources, which oversees mineral extraction in the Buckeye State.

Because of that uncertainty, Wallner - who owns more than 26 mineral acres outside Bellaire along Sand Hill Road in an area that already features multiple wells in various stages of drilling and fracking - said he has declined to sign a lease with any drilling company.

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The wording of the latest offer he received calls for paying $8,000 per acre with 20 percent worth of production royalties. Although this would land him a check for $211,145.60, in addition to future royalties, Wallner refuses to sign, largely because of the nuisance oil term.

"I told them I am not going to sign. So they said, 'We'll just take it then because we've got your government behind us,'" Wallner said. "This is all a big joke to me. It isn't right what they are doing to me, and it isn't right what they are doing to a lot of people."

Wallner objects to the Jan. 23 contract he declines to sign because it states he would receive royalties for material removed from his property, with the exception of "non-commercial nuisance oil."

"I think that is the condensate oil stuff they turn around and sell," Wallner said. "We are sitting on billions of dollars worth of oil and natural gas."

Under Ohio law, condensate refers to liquid hydrocarbons separated at or near the well pad prior to gas processing. The U.S. Energy Information Administration considers it light liquid hydrocarbons recovered from field facilities.

"I am honestly unfamiliar with the term 'nuisance oil,'" ODNR spokesman Eric Heis said.

Tim Greene, owner of Land and Mineral Management of Appalachia and a former West Virginia Department of Environmental Protection inspector, said he does not believe nuisance energy exists.

"It all has value," he said. "It might be condensate, but it could really be whatever the company wants it to be because only they would know what it is. My recommendation would be to not sign that."

Wallner's documents show an XTO representative included the term "nuisance oil" in the contract. The firm is drilling several wells in Belmont County, as there is now an active rig grinding into the ground behind the former Key Ridge School, outside Bellaire along Ohio 147.

"It is our policy to not publicly discuss these issues," XTO spokeswoman Amy Dobkin said when asked about nuisance oil and any relations the company may have with Wallner.

Even though he is receiving pressure from others to sign the contract, Wallner said he has no intention to.

"These guys laughed at me when I told them I wouldn't sign with that in there," Wallner said. "They said they are already under my house. I told them I will sleep better at night knowing they took it."

Unlike West Virginia, Ohio allows horizontal shale drillers to use forced pooling if they cannot acquire all leases needed for a new well site. The law requires a driller to sign leases for the majority of acreage surrounding the reluctant landowner, while it also states there must be no other obvious location for assembling the drilling unit.

Heis said if Wallner's land is pooled, the company doing so would have to pay him a 12.5 percent royalty on gross oil and natural gas production. However, Heis said current ODNR rules do not require a driller to pay any up front money to the pooled mineral owner, meaning Wallner would forgo the $8,000 per acre XTO is offering under such a scenario.

Still, Wallner said he does not believe the offer is fair.

"I want to see all of us get more. Some people got suckered in to signing for $5 an acre," he said. "It is a rip-off."

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Rule of thumb...if you don not understand the language in a contract, you've got 2 choices. First, get rid of the offending language completely or secondly, have the wording changed to simple English. Word of caution, ANYONE, that employs language necessitating use of an attorney is out to screw you...

"Word of caution, ANYONE, that employs language necessitating use of an attorney is out to screw you..."

That's not even slightly accurate.  The reason contracts are hard for Joe Sixpack to understand is because they were written by attorneys for attorneys (and judges, if necessary).  It isn't the job of the contract originator to write their legal documents at a sixth grade level, it is the responsibility of the person being offered the contract to be a grown up and call an attorney to help them.  That's quite literally why they exist.

Your a condescending jack wagon. Sixth grade level.

LOL So your smarter than a fifth grader on everything?

No using google to get any answers!!!!
R R,

Yeah, I guess I'm on your bus on that.

Seems to me your terms could apply quite accurately.
Dexter,

So........clutching my 'sixpack' I reply / inquire that it seems to me we could all interpret that what you call 'contract language' can be interpretted as 'legal fodder fertilizer' - like 'horse / cow puckey' - true ?

You'd do better to be clutching a dictionary and getting definitions of the terms you don't understand. You'd also do better to never sign a contract (lease) with terms that are left undefined. You'd also do better to pay a competent O&G attorney to explain anything you can't figure out on your own BEFORE you sign the lease. The average Joe Sixpack gets starry-eyed at the dollar figures thrown around by landmen and is far to eager to sign up to be fleeced. It is their responsibility to know or learn what they are signing or pay someone to explain it to them first, not after they're locked in and things start to not look like the rosy picture presented by the landman.

Yeah, yeah, yeah - we're more than well aware - but, thanks for your advice. We're on all of those buses too. Primary reasons being we realize - ESPECIALLY these days - that we HAVE to be; and since 'contract language' used in the Oil & Natural Gas arena (again ESPECIALLY) apparently (to us) seems to HAVE de-generated into more 'legal fodder fertilizer' than straight forward 'Agreement'.

Also know that we remain Pro-Oil & Natural Gas Development / Drilling, polite and friendly (not hostile) and are looking for a square deal to develop our Oil and Natural Gas (natural) resources.

Thanks again Finnbear.

The first time I looked at an O&G lease, it looked like 'legal fodder fertilizer' to me also. Trying to read and understand a lease at first will make your eyes glaze over and your head hurt. Push through it, study it, and ask questions of people who understand it. After you read a couple of them, it (the 'legal fodder fertilizer') becomes more clear. When my family and I made the decision to consider leasing our land, I started collecting leases and listening to other's complaints about the objectionable things they discovered in their leases or leases offered to them. When you start doing side by side comparisons of leases, they become much clearer. Lease language is not rocket science, but it does require diligent study. If you own any substantial amount of land, an O&G lease is potentially a six or seven figure business deal with a business partner who already knows how to play the game and win. Older leases are arguably worse than today's lengthy legalese, in that they were very short, vague, and widely subject to "interpretation". This "interpretation" often ended with one party dragging the other into court for a final "interpretation" which brought us to today's 'legal fodder fertilizer' as you like to call it. You can grumble about it and call it names or you can learn it and level the playing field. The choice seems clear if you want to win. If you want a "square deal", it is incumbent upon you to define the boundaries of that "square deal", lest it appear more like a gerrymander in it's real-world form.

EXACTLY!

That's exactly what I am talking about, how devious people operate. Honorable people talk in honorable terms without "forked tongues"...

"Nuisance" oil, it seems to me, is oil they bring up on which it is a nuisance for them to pay the royalty.  So they don't! 

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